Whilst falling oil prices should give an immediate boost to consumers’ discretionary spending power and help to provide a source of festive cheer, rising employment and a strengthening recovery in real wages should ensure that the revival in consumer spending retains plenty of vim over the coming quarters. Indeed, next year looks set to see the biggest rise in households’ real incomes in a decade. What’s more, with the outlook for inflation remaining markedly subdued, we expect the Monetary Policy Committee (MPC) to tread extremely cautiously in raising interest rates. Accordingly, we remain optimistic about the outlook for consumer spending. We forecast spending to grow by a solid 2.5% in both 2015 and 2016.
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