Consumer spending at worst levels for years as jittery households tighten purse strings

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Consumers focused spending on essentials like food as confidence waned (Source: Getty)

Consumer spending in the UK had its worst quarter since 2013 in the three months to June, as expenditure dropped 0.3 per cent year-on-year.

Spending in June was down 0.3 per cent, following a drop of 0.8 per cent in May, which gave the quarter an average decline of 0.3 per cent.

Figures compiled by Visa showed that even typically strong categories underperformed, with spending on recreation and culture dropping 1.2 per cent in June, the category's first decline for almost four years.

Read more: UK families hit with biggest decline in spending power since 2013

Meanwhile online shopping growth slowed to 2.9 per cent, down from 6.8 per cent in May, as spending in face-to-face transactions fell again by 2.4 per cent on the year.

Today's report confirms a long-expected downturn in consumer spending, as consumer confidence slides in the face of creeping prices.

Kevin Jenkins, UK & Ireland Managing Director at Visa said: “June data provides further evidence that an increase in the cost of living, coupled with slowing wage growth, are beginning to squeeze household disposable income."

Data released this week is set to show a further slowdown in wages, as average earnings grew 1.8 per cent in May, down on 2.1 per cent in April.

Read more: Weak wage growth gives BoE time before raising rates says MPC dove Cunliffe

As household purse strings tightened, spending in June was focused on essentials. Food and drink spending rose 1.9 per cent compared to the same time last year, while health and education was up 2.2 per cent. Hotels and bars also held up, with growth of 4.9 per cent.

Annabel Fiddes, economist at IHS Markit, said: “The downbeat data may add to calls for the Bank of England to keep interest rates lower for longer, as weaker consumer spending is likely to weigh on economic growth in the months ahead.”

Read more: UK economy can take a rate hike to battle inflation says BoE hawk

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