Little sign of immediate post-referendum hit to spending

The UK’s vote to leave the EU means that consumer spending growth is set to slow on the back of a weakening jobs market and a squeeze on real wage growth. Confidence has already fallen since the vote too. Nonetheless, we don’t think that a collapse is on the cards either. For a start, we only expect unemployment to drift a little higher, not rise sharply. And monetary policy is set to remain extremely accommodative, with the Bank of England already cutting interest rates. It’s also encouraging that retail sales actually rose sharply in July despite the Brexit vote. Accordingly, our forecast is for consumer spending to grow by 2.5% in 2016 and 1.5% in 2017, compared to 2.6% in 2015.