Consumer spending lurches lower
The Visa UK Consumer Spending index showed bad weather disrupting both businesses and consumers. March sales were 2.1% lower than a year ago to mark the worst quarterly performance since the fourth quarter of 2012.
Six out of eight broad spending categories showed lower spending volumes compared to a year ago. The worst-hit areas were transport & communication (down 8.6%), household goods (down 5.8%) and recreation & culture (down 5.6%). The only areas to show growth were food & drink retailers. The hotels, restaurants & bars category received a boost from the early timing of the Easter holidays.
Unusually, spending through both face-to-face and eCommerce channels declined over a year ago. Face-to-face saw a sharper reduction (down 3% year-on-year), but expenditure through eCommerce bucked the recent trend, falling by 1.2% on an annual basis.
Mark Antipof, chief commercial officer at Visa, said: “The negative impact that the ‘Beast from the East’ had on UK economic activity last month has been widely reported, but this doesn’t entirely explain March’s lacklustre consumer spending. We are in the midst of a dip in consumer confidence and this – coupled with other economic factors – is causing shoppers to continue to restrain themselves.
“High street sales suffered once again. However it is also noteworthy that e-Commerce spend fell for the first time in 10 months, and by its fastest rate since 2012. That said, it is too early to read a great deal into this year-on-year decline, which should be viewed in the context of high growth rates in early 2017.”
Around £1 in every £3 spent in the UK is on a Visa card, so the index gives a good indication of the health of the UK consumer. It chimes with other retail sales data, which show declining sentiment.
Samantha Seaton, CEO of Moneyhub, said: “It’s a tricky time for household finances, and despite an increase in the national minimum wage providing some respite for consumers, high inflation and low wage growth still have a tight grip on purse strings. With interest rates set to rise in May, it’s unlikely spending will truly pick up for a while.
“For businesses, this tough economic climate is affecting growth, as consumers are wary of spending their hard earned cash. We’re gradually becoming accustomed to seeing reports of reduced spending across most sectors, from leisure to transport, and retail to household goods. It is therefore vital that businesses are able to keep customers loyal and engaged.”