Signs of a consumer revival

The news on the economy has improved considerably over the past few weeks. Indeed, May’s PMI surveys suggest that GDP growth could accelerate to 0.4% or so this quarter, up from 0.1% in Q1. Meanwhile, the retail sales, consumer credit and consumer confidence figures suggest that stronger growth is finally coming through in the consumer sector. Admittedly, the economy may well have been temporarily bolstered by the “catch-up” of any activity that had been postponed in March due to the bad weather. Nonetheless, the revival in real wages that is already underway should help the economy to maintain this momentum over the rest of the year. Overall, we remain comfortable with our above-consensus view that real GDP will rise by 1.6% or so in 2018.