The stagnation of retail sales volumes over the past 12 months shows that all is not well in the consumer sector, but there have been some tentative signs of improvement recently. While retail sales volumes edged down by 0.1% m/m in September, growth over the third quarter picked up to 1.0% annualised, from 0.3% in the second. Consumer confidence has remained fairly high and suggests that retail sales growth will pick up in the fourth quarter. Next year, consumer spending is likely to be supported by increasing house price inflation, which looks set to reach 5% y/y by the second quarter of 2020, up from only 1.0% in October. While high levels of household debt and the low saving rate mean we shouldn’t get carried away about the prospects for consumer spending, the outlook does seem to be slowly improving.
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