UK Consumer Report

Our UK Consumer Report analyses a range of UK consumer spending indicators on a quarterly basis. Subscribers have access to all data (analytical reports and interactive data) which includes consumer spending, housing market data, consumer confidence, consumer credit, household inflation, labour market statistics, wage growth, retail sales and more.

UK Consumer - Q2 2016

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The UK Consumer report includes:

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Summary and economic overview
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Consumer spending overview
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Consumer spending by category
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Consumer spending growth (year-on-year)
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Consumer spending growth (quarter-on-quarter)
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Average spend by household
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Consumer spending by region
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Consumer spending by income decile
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Consumer spending forecasts by category

Summary

The latest data showed that both economic growth and consumer spending continued to exceed expectations ahead of the EU Referendum. The estimate for GDP in Q2 2016 was nudged up from 0.6 per cent to 0.7 per cent. Meanwhile, consumer spending rose by a solid 0.9 per cent, up from the 0.7 per cent rise reported in the previous quarter. This pushed the annual rate of growth to 3.0 per cent which is the highest since before the financial crisis and takes the level of spending to over 5 per cent above its pre-crisis peak.

Nevertheless, the outlook for business investment looks more uncertain. The Bank of England’s Agents’ Survey, which canvases opinion on investment and jobs across a spectrum of firms, showed that 49 per cent of companies would slightly reduce hiring intentions in light of Brexit. A further 6 per cent suggested that they would significantly reduce hiring activity.

Looking forward, we expect underlying conditions to weaken for households as inflation begins to accelerate in the final quarter of the year and gathers pace throughout 2017. We forecast inflation to reach 3 per cent in 2017 – higher than the consensus view of a 2.5 per cent rise. However some City banks (ING – 3.1 per cent, HSBC – 3.8 per cent) suggest inflation could reach even higher levels. As inflation accelerates to c.3 per cent next year we expect the labour market to weaken as the past reductions in hiring intentions and lower investment feeds through the economy. A weaker labour market will keep downward pressure on average earnings and so we expect real disposable incomes to remain static in 2017. However, there are a couple of noteworthy caveats. The first is that we expect some form of fiscal support from the Autumn Statement and in next year’s Budget. Secondly, another cut in interest rates is likely to be actioned before the end of the year.