Nascent recovery begins to wither

The nascent recovery in consumer spending lost pace in the first quarter and there are signs that it has wilted further since. Admittedly, some of the weakness of the latest evidence reflects temporary factors – the surveys have been affected by the earlier timing of Easter this year, while April’s drop in the official measure of retail sales volumes partly reflected the continued bad weather. Accordingly, the data may look healthier again soon. But with the jobs market now weakening and the squeeze on real earnings still set to intensify as inflation rises over the coming months, we still think that consumer spending will struggle to expand materially during the rest of 2013.