The rise in inflation, primarily driven by sterling’s post-referendum slide, has taken its toll on consumer spending growth this year. However, we think that the worst of the real pay squeeze has probably now passed. With consumer confidence still solid, in part due to the strength of the jobs market, an easing in inflation looks set to translate into decent growth in real consumer spending. Admittedly, our relatively upbeat expectations for the economy point to Bank Rate rising further next year than most expect. But given any rise will be limited by past standards, households’ debt servicing costs should remain manageable and well below pre-crisis norms. Overall, our forecast is for consumer spending growth to stabilise at around 1.8% y/y next year before picking up a bit more pace in 2019 as inflation continues to ease.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services