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26 Jan 2015
Falling UK inflation & wage growth might drive consumer spending in 2015 – ING
FXStreet (Barcelona) - James Knightley, Senior Economist at ING, expects consumer spending to perform well in the UK in 2015 as real incomes might improve with rising wages and falling inflation.
Key Quotes
“Friday’s UK December retail sales numbers were surprisingly strong, rising 0.2% MoM when auto fuel is excluded, far better than the 0.7% MoM fall the market was anticipating. We had also been expecting a big drop given that we suspected the growing prevalence of “Black Friday” sales in November would cannibalise sales from December while courier issues could also have had an impact. In the end there was weakness in non-food sales (-0.6% MoM) with sizeable drops in clothing, household goods and non-specialised stores. However, a 1.3% MoM increase in food sales, which is half of retail sales, more than offset this.”
“Consequently, consumer spending is going to be a major driver of growth in next week’s 4Q GDP number. The consensus is for growth of 0.6% QoQ, but we are predicting a rise of 0.8%.”
“With real incomes set to improve due to rising wage growth and falling inflation, tax cuts coming through and employment continuing to make strong gains, 2015 in general should see consumer spending perform well.”
“So, while inflation is currently very low and could in the very near term push below zero, we suspect that medium-term inflation pressures will build through 2015, suggesting that rate hikes are not out of the question later this year.”
Key Quotes
“Friday’s UK December retail sales numbers were surprisingly strong, rising 0.2% MoM when auto fuel is excluded, far better than the 0.7% MoM fall the market was anticipating. We had also been expecting a big drop given that we suspected the growing prevalence of “Black Friday” sales in November would cannibalise sales from December while courier issues could also have had an impact. In the end there was weakness in non-food sales (-0.6% MoM) with sizeable drops in clothing, household goods and non-specialised stores. However, a 1.3% MoM increase in food sales, which is half of retail sales, more than offset this.”
“Consequently, consumer spending is going to be a major driver of growth in next week’s 4Q GDP number. The consensus is for growth of 0.6% QoQ, but we are predicting a rise of 0.8%.”
“With real incomes set to improve due to rising wage growth and falling inflation, tax cuts coming through and employment continuing to make strong gains, 2015 in general should see consumer spending perform well.”
“So, while inflation is currently very low and could in the very near term push below zero, we suspect that medium-term inflation pressures will build through 2015, suggesting that rate hikes are not out of the question later this year.”