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UK consumer spending likely to slow, not collapse

Staff Writer |
UK consumer spending growth may slow in future, but the fall is unlikely to be sharp, as it will be cushioned by strong confidence, solid jobs growth and robust credit conditions, Paul Hollingsworth, an economist at Capital Economics, said.

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During the three months ended February, employment grew by around 39,000, which was enough to keep annual employment growth at a fairly solid 1%. Business surveys suggest the trend will be maintained in the current months, the economist noted.

The unemployment rate held steady at 4.7% in February, at its joint-lowest level since 1975.

The recent jobless rate was not far above the Bank of England's estimate of the equilibrium rate of unemployment of around 4.5%, Hollingsworth pointed out.

"However, despite the tightening of the labor market, wage growth remains fairly subdued," the economist said.

Annual growth in average weekly earnings picked up from 2.0% in January to 2.9% in February, keeping the headline three-month average rate at 2.3%.

Hollingsworth said a large pick-up in bonus pay on the month was behind the latest sharp improvement in the earnings growth figure.

Ex-bonus, pay growth fell back from 2.2% to 1.9%, below the 2.3% rate of CPI inflation that month

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