Spending recovery runs out of steam

After a seemingly strong spell around the turn of the year, the recovery in consumer spending is flagging again. Total real spending grew by just 0.1% in the first quarter, as a rise in retail sales was offset by a drop in spending off the high street. Even the rise in retail sales was partly driven by temporary factors such as good weather in March; sales have fallen since. The Queen’s Diamond Jubilee in June and the Olympics in August may provide some temporary support to certain types of spending. But the underlying picture looks weak, especially now that consumers are feeling the effects of the euro-zone crisis via rising borrowing rates and falling financial wealth.