UK Consumer Spending Falls For First Time In Nearly 4 Years

Recent data suggests that British consumers are slashing their spending for the first time in almost four years, underscoring worries of a slowdown in the economy. Based on a report from IHSMarkit and Visa, consumer spending was down 0.8 percent in May 2017 when compared to May 2016.

This was the first time that consumer spending has seen a decline since September 2013. Based on its analysis of customer spending patterns, Visa has stated that spending has declined in several categories such as household goods, clothing, food and transportation. Sales as a whole fell by 1.8 percent.

Visa managing director Kevin Jenkins said that the rising prices and stalling wage growth was starting to impact spending by consumers. He noted that non-essential product categories were hit the hardest with clothing and household goods declining the most.

In a statement Annabel Fiddes, an economist at IHSMarkit said

The outlook for consumer spending continues to look relatively bleak, with households facing faster increases in living costs and muted wage growth. The squeeze on household finances is likely to get worse as the Bank of England forecasts faster increases in consumer prices in the coming months.

The uncertainty in the UK arising from the Brexit vote last year has further heightened from the shock results of the recent general election in which Prime Minister Theresa May failed to retain majority in the Parliament. Many fear that a weak British government may lose out in the negotiations to leave the European Union (EU) which are set to start in the next few weeks.

Sky News

UK experienced the poorest economic performance among the G7 nations in the first quarter of 2017.The British pound which has been battered after Brexit dropped further after the recent election results.

Wage growth has been stagnating in the country which will likely be affirmed by government data to be released shortly. Inflation has reached 2.7 percent the highest in three years and is over the central bank’s target of 2 percent.

Analysts are anticipating the declining household spending will show up as a drop in retail sales in the soon-to-be-released official data. Retail sales have already seen the biggest drop since 2010 in the first three months of 2017.

Shopper numbers were also measured and showed that people stepping into shops are also declining, falling by nearly 1 percent. Retail analyst Diane Wehrle of Springboard pointed out that the data was also showing that lesser number of people were shopping after 5pm post as they preferred other activities such as eating out.

---