2015 was a good year for the consumer recovery and 2016 looks like it started off on a good footing, with strong retail spending and car registrations in January. The picture for spending in the near term looks positive, with the direct impact of energy price falls and heavy discounting continuing to boost real household incomes. That said, retailer cost pressures should build this year as energy and import prices recover. And we expect this to be passed onto households and result in rising inflation. With employment growth set to slow and fiscal austerity ramping up, spending growth is likely to ease. However, real incomes should still rise by around 2%, and confidence and the housing market are still supportive, so we do not anticipate too sharp a slowdown this year.
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