Deloitte Monday Briefing: UK Consumer Turns The Corner

* The last few years have been tough for UK consumers.

* Consumer spending fell by 6.6% between late 2007 and early 2009 - the biggest consumer recession since the 1930s. Since then spending has seen a weak and choppy recovery, one that has left UK consumers spending 4% less than they were in 2007.

* With consumer expenditure accounting for over 60% of the economy a weak consumer has been a major drag on the wider economy.

* But the relationship between the consumer and the rest of the economy has changed. Last year as the economy dipped back into recession the consumer sector returned to growth.

* Expenditure has risen for three quarters in a row, the first time this has happened since before the crash. In 2012 the UK economy saw no growth while consumer spending rose slightly, by 0.8%. Car sales rose by 5.5% last year. Unemployment fell and more jobs were created in the private sector than were lost in the public sector. Much of the job growth has been in part time work, self employment and government schemes, but the number of full time jobs increased too.

* This is all a long way from the roaring consumer spending of the '90s and early '00s. On average economists expect UK consumer spending to increase by 0.9% in 2013, just a quarter the rate that was the norm before the Global Financial Crisis.

* But while the outlook is hardly rosy, but there are reasons for thinking that the worst has passed for the UK consumer.

* The big tax rises and high inflation of the last 4 years are behind us. 70% of the Coalition's planned tax rises have already taken affect. Inflation has more than halved since its peak in 2011 and is widely expected to continue declining. With average earnings forecast to pick up the scene looks set for some, modest strengthening in consumer spending power this year.

* Consumer wealth has been bolstered by rising equity markets. Comparing consumers' debts to their financial assets - mainly pensions, equities, unit trusts and cash - balance sheets are in better shape than at any time in the last ten years. Falling levels of mortgage arrears and write-offs of consumer credit fit with a picture of a healthier consumer sector.

* There are signs, too, that the long credit freeze may be starting to thaw. The Bank of England's latest Credit Conditions Survey found that mortgage availability in the fourth quarter improved at the fastest rate since early 2008. Banks who responded to the survey said that the Government's Funding for...