2017 was a fairly dismal year for consumers. With prices rising more quickly than wages, consumer spending growth has halved since 2016. But is the worst of the squeeze now behind us, or is there further financial strain to come?
We think that inflation has probably now peaked, and should fall back over the course of the year. Meanwhile, there are some tentative signs that wage growth is starting to pick up. And we don’t think that consumers are about to rein in spending sharply due to Brexit uncertainty. As a result, we think consumer spending growth could surprise on the upside once more in 2018.
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