Still time for an end-of-year surge (Dec 09)

It does not appear to have been a spectacular run-up to Christmas on the high street so far. But with the Chancellor confirming that VAT will return to 17.5% on 1st January, we should see an end-of-year surge as people bring forward some spending. This should ensure that total consumer spending rises in the fourth quarter, after stagnating in the third. What’s more, the improvement in the labour market, and the lull before the storm as far as the fiscal picture is concerned, could provide some support for spending at the start of next year too. But with firms likely to engage in another round of cost-cutting, and the general election looming closer, any resilience is unlikely to last for long.