The economic forecasting company Ernst and Young's Item Club predicts UK consumers will "loosen their belts" in the rest of 2013. Will they?
It predicts that increases in personal tax allowances saving consumers almost £300 p.a. and a recovery in the housing market, spurred in large part by the government Funding for Lending scheme, will give a long-awaited boost consumer spending. According to the report it will to grow by 1.2% this year before rising to 1.9% in 2014 and 2.2% in 2015.
Peter Spencer, chief economic adviser to the Ernst & Young Item Club, said the UK "has essentially returned to relying on the consumer to drive economic growth".
TVs, tablet computers, smartphones and package holidays are predicted to be the drivers of growth in 2013. The Item Club that much of the increase in spending will be in the "elastic" sectors, such as cars, hotels and restaurants but such spending can "snap back" at the first sign of bad economic news.
ECONOMIC PARTNERSHIP COMMENT
It would be nice if it happened but it is difficult to see how the current situation, where wages are increasing at about a third the rate of inflation, will be greatly changed by a tax break equalling less than £1/day.
But we'll keep our fingers crossed.
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