Unit 2 Macro: Are UK Consumers on the Comeback Trail?

Are there signs of a recovery in consumer spending on goods and services? A rebound in household demand will be important in helping to drag the UK economy out of the double dip recession although dependency on consumption-led growth is not necessarily the best recipe for a sustainable growth of output and incomes. For too long the UK economy has relied heavily on domestic consumption rather than exports and investment.

Consumer spending is being assisted by:

i) Falling inflation which is easing the squeeze on real disposable incomes
ii) A sharp rise in dividend payments from corporates (estimated to be worth nearly £80 billion in 2012)
iii) Rising employment (now at a record high) and lower than forecast unemployment given the depth of the last recession
iv) Some signs of an easing in the mortgage market with low interest rate home loans more accessible than a year ago

Click below for some background charts and notes on consumer spending in the UK economy at this crucial stage of the business cycle

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