EY: tough times ahead for consumer oriented business

Posted at September 29, 2014 | Categories : News

Real take-home pay will still lag behind pre-crisis levels in 2017, according to a new report on consumer spending from the EY ITEM Club.

The respected economic forecaster reckons households are facing a lost decade of real wage growth and warns that consumer oriented businesses face a challenging environment as annual wage growth over the next three years remains well below the 4.5% to 5% rates typical before the crisis.

According to the report, consumer spending growth will be just over 2% next year and in 2016, compared with an average annual growth rate of 3.7% seen in the pre-crisis decade.

Martin Beck, senior economic advisor to the EY ITEM Club, comments: “Total household incomes have strengthened because more people are in work but individuals do not have extra money in their pockets.

“Real wages are being held back by strong growth in the supply of workers and the fact that firms are facing increased non-wage costs, such as new pension schemes.

“We expect this trend to continue for several years to come and it will be mirrored with a slowdown in consumer spending growth.”