PropList Blog
What a difference a couple of months can make to research!
When we first read this in January, we were surprised by the really positive tone of the research and how a "...steady (if not spectacular) growth in consumption" was expected.
3 months on with several big high street names having gone and a number struggling, we are wondering how the research would look if done now. As always with Savills research, it's excellent reference document and we are really hoping that an update will be issued soon with their 2018 projections for the retail economy and impacts on the commercial property market.
The consumer economy
January always brings very mixed messages on the health of the consumer economy, and this year is no exception. The official data on retail sales showed a 1.5% fall in sales in December on November, capping a tough year for both consumers and retailers.
Consumer confidence remains heavily polarised, with consumers being heavily pessimistic about the outlook for the UK economy, yet comparatively positive about the outlook for their own financial situation. Most tellingly the question in the GfK survey that relates to the climate for major purchases worsened in December, and is now at its lowest level since 2014.
Despite this relative confusion in the high frequency surveys, we believe that the consumer economy will be calmer in 2018 than it was in 2017. Inflation will slow, and this will return real income growth to positive territory. This will make consumers feel more comfortable about taking on debt, and the latest analysis from the Bank of England shows that most of the recent rapid growth in domestic credit levels has been driven by 'safer' borrowers.
While we do not see any reasons to be particularly optimistic about the outlook for consumer spending, we also see no reason to be particularly pessimistic. Household disposable incomes, which fell in 2017, will rise in 2018, and this will deliver steady (if unspectacular) growth in consumption.
We expect that the outlook for consumer spending will be more positive in 2018 than it was in 2017
Request a valuation of your property from local experts
Enquire now