The consumer recovery does not seem to be based on particularly strong foundations. With real incomes falling – and likely to fall further as the fiscal squeeze hits – households are having to save a smaller proportion of their income in order to keep spending. But we doubt that saving will fall much further, when banks are still reluctant to lend and consumer confidence remains weak. While we have recently revised up our forecast for overall real consumer spending this year to a rise of just over 1%, we now think that spending will fall in 2011 (compared to our previous forecast of flat spending). We doubt that spending will rise in 2012 either.
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