For the past two years, an increase in consumer spending has been fuelled by strong employment growth, raised income tax personal allowances, and low mortgage interest rates.
Another boost to consumer spending has been a falling savings ratio – the percentage of disposable income that is saved. But PwC believe the savings ratio will slow its decline with consumer confidence and house prices both showing evidence of coming off the boil.
The UK recovery has now been sustained at an above-trend rate for nearly two years since early 2013 after a couple of sluggish years in 2011 and 2012.
“The services sector will remain the main engine of UK growth for both output and employment,” said John Hawksworth, chief economist at PwC. “Manufacturing growth has moderated due to renewed stagnation in our key European export markets, while construction sector activity is also likely to slow as house price inflation moderates.”