Rising interest rates and weak employment growth will bite at consumer confidence in the U.K. in 2018, economic forecasting group EY ITEM Club said in its latest report.
Consumer spending is expected to grow by 1.3% in 2018, down from 1.4% the previous year and less than half the 2.9% growth registered in 2016. Consumer spending is projected to grow by 1.6% in 2019.
The research group said it expects spending power to rise incrementally from this year onward but results may vary across income groups.
"Consumers in the lowest income decile will see their take home pay grow 5% this year, while higher earners in the 90th income decile will see growth of 3.2%. In contrast, those in the median income decile will see their take home pay increase by just 2.9% this year," EY ITEM Club said.
In 2020, income and spending growth is expected to rise to around 2% annually, in line with the average achieved since 2000. Real income rose 0.2% in 2017 but is expected to pick up to 1.2% in 2018 and 1.7% in 2019.
The research group projects inflation to ease to an average of 2.5% in 2018, with the rate falling to 2.1% by year's end.
