Although the various measures of retail sales gave conflicting messages about the strength of high street spending in September, conditions off the high street have unambiguously improved. And in the near-term, we could see a further improvement. Car sales will be boosted further by the scrappage scheme, consumers may bring forward spending ahead of the VAT rise and rising house prices could support confidence. However, next year should bring renewed weakness, as the fiscal squeeze gets underway, policymakers’ support for the economy eases and house prices start to fall again. We continue to expect overall consumer spending to drop further next year before rising only sluggishly for several years thereafter.
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