Consumers start to feel the squeeze

CONSUMER spending has fallen annually for the first time in nearly four years, in signs that more households are reining back on purchases amid rising prices and stalling wage growth.

Spending fell by 0.8 per cent yearon-year in May, following a 0.3 per cent increase in April, Visa’s UK Consumer Spending Index found. It was the first annual fall since September 2013.

The fall was driven by a 5.3 per cent annual decline in “bricks and mortar” spending on the high street, the quickest decline since April 2012. By contrast, online spending was up by 6.9 per cent year-on-year.

Kevin Jenkins, UK and Ireland managing director at Visa, said: “Our index clearly shows that with rising prices and stalling wage growth, more of us are starting to feel the squeeze.

“The retailers of nonessential goods were among the worst hit, with clothing and household goods seeing sharp declines in sales.

“The lifestyle sectors continued to record some growth, though at much softer rates, suggesting consumers were reining in their discretionary spending.

“Bricks and mortar retailers had a particularly challenging month, with sales dropping at the quickest level in more than five years, at a time when warmer weather and the May bank holidays would usually drive shoppers on to the high street. Online retailers, on the other hand, fared well, with spend up 6.9 per cent.”

Looking at different spending categories, the strongest spending shrink in May was in the transport and communication sector, where spending fell by 7.9 per cent annually.

This was followed by clothing and footwear, which recorded the fastest fall in spending for this category since April 2012. Spending on clothing and footwear declined by 5.2 per cent annually in May. Spending on household goods was down by 4.1 per cent, the quickest fall in spending in this category since March 2013.

Among the sectors which saw an increase in spending year-on-year, miscellaneous goods and services – a category which includes trips to the hairdressers and jewellery – saw the fastest annual increase in expenditure, with a 7.1 per cent annual uplift in May.

Spending in hotels, restaurants and bars was up by 3.3 per cent annually, while expenditure on recreation and culture saw 2.2 per cent annual growth.