Consumer spending growth at four month low after Christmas boom
Consumer spending growth slowed to 0.4 per cent on the year in January, putting it at a five month low according to Visa’s UK Consumer Spending Index.
Following the Christmas shopping jump of 2.5 per cent in December, January proved sluggish and saw the fastest decline of face-to-face spending in four years (-3.1 per cent).
E-commerce held its own however, growing by 4.1 per cent.
There was also good news for providers of experiences rather than goods, as Brits continued to prefer going out to shopping. Spending on hotels, restaurants and bars saw the biggest rise of 5.7 per cent year-on-year. Recreation and culture also grew by 3.1 per cent.
High Street retailers took the biggest hits, with expenditure on clothing and footwear dropping 3.8 per cent on the year, the fastest annual reduction since April 2012. Spending on household goods also declined by 2.7 per cent.
Kevin Jenkins, UK and Ireland managing director at Visa, noted: “The traditional start of year sales did little to lift clothing spend, which saw the biggest drop in nearly five years.”
Annabel Fiddes, economist at IHS Markit, blamed this poor performance on the High Street for dragging down the overall spending growth.
Se also warned that knock-on effects of the weakening pound could be a key factor in the coming months: “households’ purchasing power will be squeezed further which, combined with relatively muted consumer confidence, may lead expenditure to settle on a slower growth trajectory in 2017.”
Recent ONS data also showed the biggest increase in living costs for two years, which has squeezed consumer spending power.
Spending on health and education continued its downward trend, dropping by 2.1 per cent year on year in January, after a decline of 1.6 per cent in December.
Transport and communication saw the biggest annual drop in expenditure, declining 5 per cent despite a modest rise of 0.6 per cent in the previous month.