December’s retail sales figures were pretty disappointing, suggesting that the sector grew by 0.4% in Q4 as a whole, half of Q3’s 0.8% rate. What’s more, growth in non-retail spending is likely to have been subdued in Q4 too. The rebound in car sales explained much of the strength in total spending in Q3. But with our seasonally-adjusted measure of new car registrations falling by 1.1% in the three months to December, this boost won’t be repeated. Overall, then, consumer spending growth has probably slowed a little in Q4, from Q3’s 0.5% rate. Nonetheless, with inflation likely to have now peaked, the worst of the real pay squeeze should have passed, paving the way for a recovery in real spending growth this year.
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