Second-quarter rebound driven by consumer spending

The latest data indicate that GDP growth has rebounded to nearly 3% annualised in the second quarter, mainly due to a similar-sized gain in real consumption growth. Indeed, although underlying retail sales edged lower in May, strong gains in previous months mean that the three-month-on-three-month annualised growth rate nonetheless rose to an 11-month high of 5.1%. And with labour market conditions still strong, real income growth picking up and consumer confidence at high levels, real consumption looks set to grow at a solid 2.5% annualised pace over the rest of this year.