Decline in UK consumer spending continues - Visa

The latest spending data from Visa UK showed a continued decline in household expenditure throughout September, the fourth fall in the past five months.

After showing a 0.2% increase in August, household expenditure declined 0.3% on annual basis through September.

Visa predicts consumer spending trends will remain "relatively muted for the rest of the year".

Kevin Jenkins, Visa's managing director for the UK and Ireland, said: "Despite a slight uptick in UK consumer spending in August, the story of the past few months has been one of wariness in household spending. September saw another decline in overall expenditure, continuing the recent trend of belt-tightening, as the landscape of financial uncertainty takes its toll."

Face-to-face sales had declined 3.2% in the month, e-commerce sales continued to show resilience at 2.8%.

The sharpest reductions in spending were noted in the transport and communication and household goods sectors, as five of the eight top-line categories recorded a lower year-on-year amount.

The recreation and culture sector saw its first decline in expenditure since June, albeit a modest one of 1.3%, with clothing and footwear retailers also experiencing a marginal reduction in spend of 1.0%.

On the other hand, hotels, restaurants and bars had a "relatively subdued" increase in spend of 3.5%, and the food, drink and tobacco category gained 1%.

"The recreation and culture sector declined at its fastest rate since July 2013, bucking a trend in which the 'experience economy' has remained buoyant in the face of stagnant wage growth and increased inflation. Despite this, there is a bright spot in this month’s data as hotels and restaurants saw an increase in spending of 3.5%. Speculation that the weak pound could have a positive impact on the hospitality sector seems to have come to fruition, with this increase likely reflecting recent figures which show the country is drawing record numbers of tourists from overseas," said Jenkins.

Growth in consumer spending in the year had remained largely elusive as of September, due in part to squeezed household budgets, as heightened living costs outpaced the weak growth in earnings that came in despite an otherwise robust set of labour market statistics for the UK, with the unemployment rate hitting a 42-year low of 4.3%.

Lingering Brexit uncertainties alongside the strength of Britain's economy were said to be key factors weighing on the confidence of both consumers and businesses in the UK.

Annabel Fiddes, IHS Markit's principal economist, said "Rising living costs, muted wage growth, and ongoing uncertainties surrounding Brexit negotiations and the strength of the UK economy continue to act as drags on household spending."

"Heightened expectations that the Bank of England may start to hike rates may in turn help to rein inflation back towards its 2.0% target, but there are questions surrounding the underlying strength of the economy. Notably, the latest PMI survey data suggest that UK private sector growth remained sluggish over Q3 and, combined with the CSI figures, suggest that the economy is currently on course for a relatively subdued year of growth," added Fiddes.