The combination of a relatively stable result to the general election, improving employment numbers, and the return of real earnings growth led to a bounce in the Gfk consumer confidence measure from +1 to +7 in June. This is dramatically ahead of the long-run average of -8, and close to a record high for this index. Furthermore, the same survey showed that the climate for major purchases grew from +2 to +16, which is a new post-GFC high.

^{Source: Gfk}

This strength in the consumer sector is feeding through to the overall GDP numbers, with the third released of Q1 GDP being revised upwards from 0.3% to 0.4% quarter on quarter (with consumption growing by 0.9% over the quarter).

At a macro-level, the outlook for the UK consumer is looking pretty rosy. Inflation is expected to stay low, and this will delay and slow the need to raise interest rates. Low fuel and food prices are helping real earnings growth, and average weekly wages excluding bonuses are firmly back in positive territory.

Prior to the summer Budget our biggest concern about the prospects for the consumer economy lay around the depth of the planned cuts in benefits and public spending. The improving economy and tax take has given the Chancellor some wiggle room, and the severity of the planned cuts to departmental spending has been slightly reduced. This is of particular importance for those towns and cities around the UK where the public sector is the major employer. While the outlook may be slightly less painful for some areas, we still remain cautious about the impact of the remainder of the austerity programme on some local markets.

The other major event of the last quarter has be the re-emergence of problems in Greece. We believe that there are still a number of ways that the EU could solve this problem without causing Greece to leave the Euro.