The consumer recovery is still going strong, with household spending the driving force of the overall economic recovery. Although the retail sales figures have been a bit volatile recently, the underlying trend still looks robust. That said, price discounting remains intense. And consumers face some challenges in the coming months. Despite some giveaways in the Budget, for example, the net impact of all measures due to come into effect in April will drag on consumers’ incomes. That said, low inflation will keep supporting real pay. And we think that uncertainty ahead of the EU referendum will affect firms more than consumers. Accordingly, we don’t expect consumer spending to slow especially sharply; we anticipate a 2.5% rise in real spending this year.
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