There are concerns that the expected rise in inflation will cause consumer spending growth to slow sharply ahead. Indeed, households would probably have to run their saving rates far below all-time lows in order to maintain their recent pace of spending growth.
It seems unlikely that consumers will be prepared to do quite this much. But there are reasons to think that the moderation in spending growth shouldn’t be too stark – particularly as the desire for precautionary saving doesn’t look too strong at present and credit conditions should remain supportive. Accordingly, we think that spending growth will only slow from about 2.8% this year to around 2.0% in 2017 and 1.5% in 2018.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services