UK consumer spending rises in July despite Brexit vote

Despite the UK voting to leave the European Union, UK consumer spending picked up in July as people spent their money on clothes, days out and dinners at restaurants.

The Visa consumer spending index, calculated by Markit based on credit and debit card usage, found that spending increased 1.6% year-on-year in July, which was the biggest rise in three months, and up from 0.9% in June.

However, it was still lower than the 2.4% average growth over the past two years.

Seasonally-adjusted spending increased by 1.1%, a strong month-on-month gain since January, reversing the 0.5% decrease in June.

"July's data suggests that UK consumer spending is holding up despite the ongoing uncertainty following the referendum, albeit at lower levels of growth than we've seen in the last couple of years," said Visa UK & Ireland managing director, Kevin Jenkins.

"Looking at the last three months, the index indicates that consumers remain cautious with their spending. Overall growth is hovering nearly one percentage point below the average seen over the past two years."

Looking at different sectors, the longer term trend for increased spending on leisure and recreation has endured, while the high street saw its strongest annual growth rate in five months with clothing retailers in particular bouncing back after a fall in June.

Hotels, restaurant and bars grew 8.9% year-on-year. The recreation and culture sector grew 5.2% and the food, drink and tobacco industry grew 5.1% in July.

Spending in the transport and communication sector fell 3.8% year-on-year in July, but was the smallest decline over the past three months.

Other consumer spending surveys said since the EU referendum on 23 June have indicated declines instead, principally the GfK consumer confidence measure just two weeks after the vote, which found morale had dropped at the sharpest rate in about 22 years, by eight points to 9%.

This was one of the measures that might have moved the Bank of England last week to cut interest rates for first time in seven years, to 0.25% to 0.5%, and add to its quantitative easing programme to stimulate the British economy. The Bank also cut its forecast for household consumption to 1% from 2.5% in 2017 and 0.75% in 2018.