With real incomes under pressure from subdued nominal pay growth and rising inflation, the strong rise in retail sales volumes in November is encouraging. However, spending on the high street might have come at the expense of non-retail spending. And in recent years, Black Friday discounting has generally led consumers to do their Christmas shopping earlier than usual, rather than making many additional purchases. So some weakening in December seems likely. Nonetheless, it would take a very big drop in retail sales to prevent sales in Q4 as a whole from rising strongly. As a result, the high street should provide welcome support to GDP growth in Q4. What’s more, with inflation set to drop next year, the squeeze on households’ finances should soon ease, allowing consumer spending growth to re-gain some strength.
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