While the uncertainty caused by Brexit is hampering consumption, households’ finances are fundamentally sound. Indeed, with earnings growth at a decade-high in December and inflation below its 2% target, households are now enjoying the first sustained period of decent rises in their real wages since the financial crisis. This suggests that once the uncertainty around Brexit clears, consumers will have both the ability and the willingness to boost spending. If a deal on Brexit is reached in the coming months, we expect consumer spending growth to accelerate in late-2019 and to reach 2% in 2020. In a no deal Brexit, we suspect that sentiment would deteriorate and households would struggle with the uncertainty and the economic disruption, which would cause spending growth to fall to zero this year. But households would probably only have to endure a short period of lower incomes before real wages and employment started rising again. As a result, spending may still grow by 1.0% in 2020.
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:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services