Consumer spending is up but caution appears to be growing

 
Alys Key
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Spending on recreation and culture grew by the most of any sector (Source: Getty)

Consumer spending for February was up 1.5 per cent on the same time last year, according to the monthly Visa UK Consumer Spending Index. This marks a jump back up from a five-month low of just 0.4 per cent year-on-year growth in January.

Trends from previous months held fast, with yet another rise for e-commerce spending, which grew by 3.2 per cent. However, this was the third consecutive month in which online sales growth eased, dropping down from 4.1 per cent in January, pointing to a slowdown.

Face-to-face spending continued its steady decline, dropping three per cent on the year.

Experiences continue to outstrip goods, as spending on recreation and culture increased by 3.3 per cent compared to last February. While expenditure at hotels, restaurants and bars also saw a rise of 1.2 per cent, growth has slowed from the big jump of 5.7 per cent in January.

Kevin Jenkins, UK and Ireland managing director at Visa, said the growth in leisure and hospitality was softer than was seen in 2016, saying that “consumers are becoming more cautious with their discretionary spending”.

The overall annual rate of spending growth also failed to live up to the average through 2016 of two per cent. In monthly terms, overall spending rose just 0.1 per cent compared to February.

Annabel Fiddes, economist at IHS Markit, warned that the slower growth was likely to be a trend this year. She said: “Brexit-related nerves and concerns over the direction of the UK economy are feeding through to relatively low levels of consumer confidence, while expectations that unemployment could start to edge up this year could also weigh on consumer spending.”

There was little change in terms of which sectors shrank and which grew. Food, clothing, household goods and transport all saw spending decline in February, with clothing seeing the fastest reduction of 4.5 per cent.

However, spending on health and education saw the biggest rise compared to the previous month. Spending in the sector fell by 2.2 per cent on the year in January, but pushed up to modest growth of 0.9 per cent in February.

Aside from the leisure and hospitality industries, the other sector which grew was miscellaneous goods and services, up two per cent. This category includes everything from financial services to beauty and jewellery.

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