As we expected, consumer spending picked up pace towards the end of December. Not only do consumers tend to do their Christmas shopping later and later, but the VAT rise encouraged them to bring some spending forward. That said, the modest rise in the official measure of sales suggested that December wasn’t as good as the timelier surveys had suggested. What’s more, spending is likely to drop back after the VAT rise. And a number of clouds loom on the horizon, most notably the fiscal squeeze. Admittedly, with the housing and labour markets still strengthening, spending could hold up relatively well at the start of the year. But any resilience is unlikely to last for long.
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