Retailers’ cost pressures build further

Household spending has remained remarkably robust, despite Brexit uncertainty. Admittedly, this looks unlikely to last. After all, while wage growth is picking up, inflation is on the rise too. Indeed, CPI inflation looks set to pick up to around 3% by the end of this year, and as a result, we could start to see some small falls in households’ real incomes. Nonetheless, with confidence remaining high by past standards, and low interest rates to ensure that the cost of servicing debt remains low, we expect a slowdown rather than an outright contraction in spending this year. We expect spending growth to slow from about 2.8% in 2016 to around 1.8% in 2017.