Payroll tax hike to hit January incomes hard

The expiry of the payroll tax cut will contribute to what could be a 3.5% m/m slump in personal disposable income in January. We expect any decline in real consumption to be pretty modest, however, with households absorbing the loss of income by lowering their saving rather than spending. Nevertheless, for the first quarter as a whole, real consumption growth is likely to be only 1.0% annualised, with GDP growth a little stronger at 2.0%.