Press Releases | Visa
UK Consumer Spending Index July 2019: Household spending falls again in July
Visa’s UK Consumer Spending Index, compiled by IHS Markit, signalled a further fall in overall household spending during July. At -1.2% year-on-year, the reduction was modest and softer than that seen in June (-1.4%). Nonetheless, this extended the current period of declining spend to ten months, to mark the longest sequence of falling expenditure since 2011/12.
The slightly softer reduction in total spend was supported by a renewed upturn in expenditure via eCommerce channels. Spending in this category grew +1.1% year-on-year in July, which was the quickest rate of increase since October 2018. In contrast, Face-to-Face spend fell for the third month running, and at a quicker rate than in June (-2.9% on the year, compared to -2.1%).
Broken down by sector, the weakest performance was seen in Clothing & Footwear categories, which recorded a -5.2% year-on-year decline in spend. Transport & Communication also saw a marked decline in expenditure (-3.1%). After rising slightly in June, Food & Drink retailers noted a drop in spend for the second time in three months (-2.8%). Although Hotels, Restaurants & Bars saw a sustained upturn in expenditure, the rate of growth was the weakest seen for six months (+1.7%). Renewed increases in spend were meanwhile seen in Household Goods, Health & Education and Recreation & Culture categories, though rates of expansion were marginal in each case.
Adolfo Laurenti, European Principal Economist, Visa, commented:
“The UK Consumer Spending Index continues to portray a rather soft picture for consumption during Summer. The decline of -1.2% year-on-year marks the tenth consecutive month of weakness, and it illustrates the persisting headwinds that the retail industry is facing. The drop in Face-to-Face transactions aligns with other retail indicators which show weakness in sales. In particular, Clothing & Footwear registered some of the largest declines, followed by Transport & Communication and Food, Beverages & Tobacco. There are a few bright spots in the report, eCommerce bounced back after hitting a soft patch in June, while Recreation & Culture, Household Goods, and Hotels, Restaurants & Bars posted some gains after a late Spring lull. We take this as evidence that, despite an overall lack of confidence and weak expectations for the future, consumers have the wherewithal to return to the High Street for selective purchases, as wages continue to improve and the unemployment rate stays at modest level."
Annabel Fiddes, Principal Economist at IHS Markit, said:
“UK Consumer spending remained subdued in July, with the latest Visa CSI data pointing to another year-on-year drop in overall expenditure. Although the rate of reduction softened from -1.4% in June to -1.2%, underlying data show that there is notable weakness stemming from the High Street, with Face-to-Face spending declining -2.9% on the year in July."
“Lower expenditure coincides with an increasingly uncertain economic outlook and broadly stagnant business activity across the UK at the start of the third quarter, according to the latest IHS Markit PMI surveys. The disappointing GDP number for Q2 will also add to concerns that heightened uncertainty is acting as an increasing drag on economic performance.”
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