Consumers have a spring in their step

The recovery in consumer spending has shown no signs of slowing this year, with indicators suggesting that both retail and consumer services spending have grown strongly. Admittedly, households have partly funded their extra spending by saving less. But the drivers of the consumer recovery should become more sustainable very soon. Indeed, average earnings look set to rise in real terms imminently, thanks to a combination of falling inflation and stronger nominal pay growth. Meanwhile, business surveys continue to point to further strong growth in employment. Accordingly, real consumer spending still seems to be on track to grow by a robust 2.5% or so this year.