Mixed consumer picture
Despite many positive headwinds for consumers over the past twelve months, they still appear somewhat wary as we head down the back half of the year. While inflation has continued to ease and real incomes are growing – helped by rising wages and tax cuts – retail sales were soft in Q2, though we do have evidence that consumers have been favouring spending on services over goods recently. Car sales have also been fairly modest and are barely up in annual terms post the key July registration period, with falling sales of electrical vehicles not helping. Consumer confidence picked up in July, but is yet to reach its pre-Covid levels with the impact of the double blows of the pandemic and the pickup in inflation that followed still lingering. All that being said, we still think that consumer spending will improve as households are helped by lower inflation, interest rate cuts on the horizon and potentially further supportive fiscal measures in Budget 2025 due in October.
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