How long will the consumer spending spree last?

There are concerns that the expected rise in inflation will cause consumer spending growth to slow sharply ahead. Indeed, households would probably have to run their saving rates far below all-time lows in order to maintain their recent pace of spending growth. It seems unlikely that consumers will be prepared to do quite this much. But there are reasons to think that the moderation in spending growth shouldn’t be too stark – particularly as the desire for precautionary saving doesn’t look too strong at present and credit conditions should remain supportive. Accordingly, we think that spending growth will only slow from about 2.8% this year to around 2.0% in 2017 and 1.5% in 2018.