While household spending growth slowed markedly in 2017, the outlook for 2018 and beyond looks brighter. Indeed, the worst of the real pay squeeze appears to have passed. Following a peak of 3.1% in November 2017, CPI inflation has started to fall back and we expect it to continue to fall to around 2¼% by the end of the year. Meanwhile, surveys of salaries points to a pick up in nominal wage growth ahead. Overall, we expect consumer spending growth to average 1.5% this year, with growth accelerating in the second half of the year. We forecast growth of around 2% in 2019.
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