UK consumers cut spending in run-up to Christmas — Visa
LONDON: Squeezed British consumers reined in Christmas travel plans and bought fewer new cars last month, setting the stage for the first fall in festive spending in five years, credit card company Visa said on Monday.
The downbeat message came alongside a cut by the British Chambers of Commerce to its economic outlook for the next two years as the business organisation sees inflation rising faster than pay for the next two years.
Visa said inflation- adjusted consumer spending last month was 0.9 per cent lower than in 2016. This was a smaller decline than October’s 2.1 per cent drop but still enough to make annual falls in spending likely for the first time since 2012 for both the Christmas season and 2017 overall, the company said.
The biggest falls in spending came on expensive items such as cars and Christmas trips abroad, while cheaper luxuries such as beauty treatments and cosmetics saw gains.
“People opt for smaller treats, at the same time tightening their belts when it comes to larger purchases,” Visa executive Mark Antipof said.
Black Friday discounts in late November boosted online sales at the expense of physical stores, Visa added.
British inflation has held at a five-year high of three per cent since September, pushed up by the fall in the pound since June 2016’s Brexit vote, while wages have failed to keep pace.
The British Chambers of Commerce, in a quarterly update to its economic outlook on Monday, said it expected this to persist throughout 2018.
“Continued uncertainty over Brexit and the burden of upfront cost pressures facing businesses is likely to stifle business investment, while falling real wage growth is expected to continue to weigh on consumer spending,” BCC economist Suren Thiru said.
The BCC cut its forecasts for 2017, 2018 and 2019, seeing growth of 1.5 per cent this year, slowing to 1.1 per cent in 2018 and only partially recovering to 1.3 per cent in 2019.
This is slightly below the average for economists polled by Reuters, who expect growth of 1.3 per cent next year and 1.5 per cent in 2019, when Britain is due to leave the European Union. — Reuters