While financial markets are concerned that the slump in energy prices and the drop back in long-term interest rates partly reflect the weakness of economic growth in Europe and Asia, consumers have no such worries. Instead, the boost to real incomes and lower borrowing costs have pushed consumer confidence up to a decade high. Admittedly, December's retail sales were disappointing. Nevertheless, alongside the strength of employment growth, these are reasons to believe that real consumption growth will be a robust 3.0% annualised over the first half of this year.
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