Consumer spending feels the pinch amid Brexit uncertainty

UK Car Sales Up 8.6 Per Cent Year on Year
A 4.4 per cent decline in transport and communication was fuelled by falling car sales (Source: Getty)

Enduring political uncertainty was to blame for weak consumer spending over Christmas, according to figures released today.

Consumer spending fell by one per cent in December compared to the same month in 2017, research from Visa and IHS Markit reveals, its biggest monthly drop since April.

Read more: UK car sales decline for the second year in a row

A 4.4 per cent decline in spending on transport and communication, as well as a 1.6 per cent dip in face-to-face transactions on Britain's high streets, fuelled the decline, after vehicle sales fell for the second year running in 2018 according to industry data, while retailers experienced their worst Christmas in a decade in December.

Declines were also experienced in clothing and footwear spending, which fell 2.2 per cent in December, and in consumer outlay on recreation and culture, which dropped 1.5 per cent. Miscellaneous spending on goods and services also felt a 1.5 per cent hit, while household goods spending dropped 1.2 per cent.

Annabel Fiddes, principal economist at IHS Markit, said the data signalled a "disappointing" end to 2018, with the consumer-side decline mirroring muted business activity in December.

"The spend figures add to evidence that the UK economy is likely to have slowed in the final quarter of 2018,” she warned, adding: "The sustained fall in expenditure throughout the fourth quarter of 2018 coincides with a marked drop in consumer confidence, as uncertainty around the UK’s impending exit from the EU continues to dampen sentiment."

Read more: Retailers hit by worst Christmas in a decade

But while Adolfo Laurenti, Visa's European principal economist, agreed that households "remained very cautious", he also pointed to a 7.6 per cent year-on-year rise in spending at hotels, restaurants and bars to suggest some discretionary spending has proved more robust than others.

"An acceleration in spending at hotels, restaurants and bars (+7.6% year-on-year) suggests that some categories of discretionary spending are holding up better than the market as a whole," Laurenti said.

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