UK: consumers spending salary but losing PPI
- UK retail sales marginally contracted in Oct-19 back to their still brisk trend. Real wage growth has supported spend and should keep doing so amid low inflation into yearend. Retail surveys should stay excessively gloomy until uncertainty clears.- Consumers remain relatively confident about their personal situation, which helps encourage sales, although vehicle sales are suffering industry-specific headwinds.
- Extreme inflation expectations could constrain confidence for hawkish reasons. The roll-off PPI compensation payments will also remove highly discretionary spending power worth about 1% of sales in an offset to rising real wages.
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