There is little reason to expect the strong growth in consumer spending seen so far this year to ease off soon. The latest business surveys indicate that employment will continue to grow rapidly over the coming months. At the same time, slack in the labour market now appears to have declined enough to enable annual growth in average weekly earnings to pick up. And while outright deflation is likely to have lasted for one month only, we think that CPI inflation will remain below 1% throughout the rest of 2015. Accordingly, we continue to think that real household spending could grow by a solid 3% this year, the most since 2005.
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