Consumers benefiting from falling prices

Recent weeks have seen some signs of an improvement in the consumer sector. Although retail sales fell by 0.4% in Q2, the drop was not as sharp as Q1’s 0.8% fall. Together with a 12% surge in car sales, this points to an increase in total spending in Q2 after Q1’s 0.4% decline. But the pick-up has almost certainly reflected recent falls in consumer prices, a boost which will ease in time. And with labour market conditions still deteriorating rapidly, a sustained consumer recovery is probably too much to hope for.