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Daily Telegraph: "More consumer spending doesn’t mean we have the wrong sort of recovery"

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"By now, it has become a well-worn refrain that this is the wrong sort of economic recovery, driven by debt-fuelled consumer spending. In fact, the truth is more complex – and somewhat more reassuring.

"... Talk of a debt-fuelled surge in consumer spending is well wide of the mark. While the increase in consumer credit has averaged £0.6bn over the first 10 months of this year, this is well short of the £1.5bn monthly average in the decade before the financial crisis. What will happen from here? I am optimistic that inflation will continue to fall next year.

"... Admittedly, the period when real earnings increase at their historical average of about 2pc is likely to lie beyond the election. And at that stage, for the recovery to continue, it will have to have broadened out to include substantial growth of exports.

"If that has not happened, then the recovery will surely founder, not least because at some point the housing market rally will come under pressure. But, for now, there is no need to fret about the fact that consumer spending is rising modestly."

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"How fragile is the 2014 recovery?"

"The economic recovery we've witnessed in almost all the developed and big economies this autumn will continue through most of 2014, and in some cases - including the UK's - may gain momentum.

"The 'flows' in the global economy - temporarily at least - are not as strong a brake on growth as they were: the pace of tax rises and spending cuts has slowed almost everywhere; consumers are more confident, largely because there haven't been any truly hideous shocks for almost two years; and businesses are a bit more confident.

"And, of course, central banks have continued to create free money and cheap credit as if there is no tomorrow - to offset the intractable reluctance of commercial banks and financial institutions to create credit.

"Hey presto, this is the jolliest Yule for six years. And if you don't want to spoil the festive mood, stop reading now."

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