Consumer spending falls in UK

09 May 2012

LONDON: Consumer spending levels are continuing to decline in the UK, reflecting the challenges facing the country's economy.

According to a new study from Visa Europe, the financial services group, expenditure rates fell by 1.9% in April on a monthly basis, and by 4.3% compared with 12 months earlier.

"April saw a surprisingly large drop in consumer spending," said Steve Perry, commercial director at Visa Europe.

"Spending in March was artificially inflated by fuel panic buying which masked an underlying trend of weak consumer confidence ... The Index data reflects the fact the UK economy has entered a technical recession."

More specifically, "face-to-face" expenditure fell by 6.9% year on year in April 2012, not least as a result of poor weather, and a sales spike a year earlier because of the royal wedding.

The internet also witnessed a modest 0.8% slide on an annual basis, and mail order and telephone figures contracted by 6.6% during the same timeframe.

Among the categories which were hit hardest by the slump was food, beverages and tobacco, down by 8.3%. Elsewhere, clothing and footwear registered an 8.1% dip.

Household goods, however, endured the greatest single decrease, off by 9.6%, with transport and communications experiencing a 4.4% decline.

Conditions were rather more favourable for hotels and restaurants, where totals improved by 3.3%, while recreation and culture logged a 0.9% rise.

Despite this, Chris Williamson, chief economist at Markit, which helped compile the study, argued that the longer term picture is still adverse due to high unemployment, low pay growth and strong inflation.

"Spending in April showed one of the largest monthly falls seen since the height of the financial crisis in early 2009," he said.

"The underlying trend in the spending data clearly remain weak, and will raise concerns that the economy has started the second quarter on a worse footing than the first quarter."

Data sourced from Visa Europe; additional content by Warc staff