Early signs of a consumer revival

Annual consumer spending growth ground to its slowest pace in six years in Q1. Alongside a string of weak early indicators of spending in Q2, that called into question our forecast of a rebound in spending growth over the course of the year. Indeed, there is a sizeable risk that, having reduced saving during the real income squeeze, consumers will choose to save rather than spend more of their money as real incomes recover. With consumer confidence high, however, this seems unlikely. Our view remains that robust employment growth and rising real wages will support a recovery in spending growth over the remainder of the year. The strong rebound in retail sales in April provided some early support for this.