The near-term outlook for the consumer recovery has weakened since the UK voted to leave the EU last month. Indeed, consumers’ confidence in the economic outlook deteriorated sharply, and the drop in the pound is set to eat into real income growth over the next couple of years. That said, we don’t think that consumer spending is on the verge of a sharp slowdown. Confidence remains at a fairly strong level by past standards, interest rates are set to remain lower for longer and will probably be cut further soon, and the jobs market is in a healthy position. Accordingly, we expect consumer spending growth to slow from 2.6% in 2015 to 2.4% this year, and to 1.5% next year.
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