Are euro-zone consumers running out of steam?

Perhaps the most notable positive surprise in the euro-zone last year was the strength of household spending. Spending looks likely to have expanded by 1.5% or more in 2015. This would be the strongest increase since 2007 and account for almost all of last year’s pick-up in GDP growth.

However, there are growing signs that consumers are starting to run out of steam, with retail sales likely to have fallen in Q4 last year and rising inflation set to dampen real income growth and spending this year. With other parts of the economy unlikely to compensate fully, we continue to think that economic growth will slow in 2016 rather than accelerate as the consensus expects.