Author Lauren Howells
UK consumer spending has decreased in each of the past three months, according to released by Visa, the longest period of decline since the five month period ending in February 2013.
In what is being making its way into households, spending fell by 0.8% in July, when compared to July last year. This was faster than June’s 0.2% decline.
Some of the biggest decreases in UK consumer spending were seen in Transport & Communication, which reported a 6.1% decline year-on-year and Clothing & Footwear, which saw a 5.2% reduction in consumer spending.
Spending on Household Goods saw a decline of 4%, while Health & Education saw a 2.4% decrease. Visa also reported that spending across Household Goods categories had either fallen or stagnated in each month since last December.
Although Food & Drink consumer spending was also down by 0.5% annually, Visa found that there was more spending in the Hotels, Restaurants & Bars category, which was up 6% year-on-year.
Additionally, Recreation & Culture also saw growth of 1.3%, following a slight fall in June.
“Consumer spending fell for the third month in a row in July, the first time overall spending had fallen for three consecutive months since February 2013. The figure provides further evidence that rising prices and stagnant wage growth are squeezing consumers’ pockets,”
said UK & Ireland Managing Director at Visa, Kevin Jenkins.
Mr Jenkins went on to say that there were some “bright spots” in July, with the 6% increase reported by hotels, restaurants and bars. “The sector is likely to have benefited from an early surge in summer staycations, as the weak pound made holidaying at home more attractive,” he added.
A fall in sales in the UK car industry in July of 9.3% as a sign that consumers and businesses may be growing more and more reluctant to commit to “big spending decisions”, possibly due to the ‘Brexit-effect’.
Principal Economist at IHS Markit, Annabel Fiddes said,
“Reduced spending comes at a time when the UK economy has been expanding at a relatively modest pace, while households have been facing strong increases in living costs, and a slowdown in earnings growth. Notably, the latest ONS figures show total real pay falling at the quickest pace for nearly three years.”
She went on to talk about the “renewed squeeze” on household budgets alongside the backdrop of lingering uncertainties over the direction of the economy and the outcome of ongoing Brexit negotiations.
“All this makes it seem unlikely that consumer spending will recover in the current challenging conditions, and adds to expectations that the Bank of England will not hike rates anytime soon,” she added.
At the end of last week, that the Bank of England had said that the uncertainties surrounding Brexit had discouraged some firms from awarding pay rises.