Consumer demand

Consumer spending has expanded consistently for seven quarters. The initial momentum in 2012 came from a pickup in real income growth, driven by strong job creation, lower inflation and the generous uprating of social benefits. This momentum appears to have stalled in 2013H1, although the picture is complicated by higher earners having delaying income to take advantage of the reduction in the top rate of income tax from 50% to 45%. Yet despite the slowdown in real incomes, spending has held up because confidence has improved and households have reduced their precautionary saving; the savings ratio fell back from 6.8% in 2012 to average 5.2% in 2013H1…