While the overwhelming fashion in economic comment so far this year has been to be deeply negative, we still believe that the fundamentals of the UK consumer economy are strong for 2016.

While the outlook for global economic growth is undeniably weakening, we should remember that it was only a few years ago that we were worried that we didn't trade enough with the BRICS countries - now this may well be a benefit, with our major trading partners of the USA and Europe doing well and better than expected.

Furthermore, however bad the global picture, it will take a while to filter into the consciousness of the UK consumer, who is currently on a bit of a caffeine high due to the sharp recovery in real earnings growth. While the latest ONS data for retail sales showed a 1% fall in volumes month-on-month, the year-on-year growth remained a very healthy 2.6%.

Consumer confidence remains well above its long term average, and the household saving ratio continues to fall. Furthermore, while the latest pay data show a slowing in the rate of growth, average weekly earnings were still 2.0% higher for the three months to the end of November than they were for the same period in 2014.

This rush of positivity will undoubtedly cool as the combination of public sector austerity and macro-turbulence drag on confidence. However, until then we expect to continuing steady growth in retail sales and consumer spending, particularly since the potential drag on house price growth from rising interest rates still remains some way off. Indeed, the latest implied consensus is pointing to the first rise in the UK base rate not coming until October 2017.

^{Source: Gfk}