The recent behaviour of aggregate consumer spending

Carruth, Alan and Henley, Andrew (1993) The recent behaviour of aggregate consumer spending. Quarterly Economic Commentary, 18 (3). pp. 75-83. ISSN 0306-7866

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The modelling and forecasting of consumer behaviour has in the last few years taxed economists considerably. By the middle of the boom of the late 1980s it was becoming apparent to most forecasters that their popular models of UK consumer behaviour were failing to forecast the extent of the sizeable growth in real consumer spending at the time. Personal sector savings rates reached post-war low levels and by 1988 real consumer spending growth reached 7 per cent per annum. Since that time we have witnessed a quite spectacular collapse in consumer spending and in confidence, to the extent that savings rates have been restored quite rapidly. This paper seeks to understand the nature of consumer spending over recent years and explain its recent slump.