How will the squeeze on UK household finances affect spending?

摘要

Over the past thirty years consumer spending has consistently been the key driver of UK economic growth, but the consumer boom came to an end in early-2008 when first the spike in oil prices and then the onset of the credit crunch triggered a steep consumer retrenchment. The peak-to-trough decline in consumer spending was significantly greater than those endured in either of the two previous UK recessions and the subsequent recovery has been much weaker, even though the MPC responded aggressively to the crisis by rapidly slashing interest rates to 0.5%. In our view prospects for the next couple of years are relatively bleak, with household finances under severe pressure.