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Consumer spending growth slumped to more than two-year low ahead of Brexit vote

Published 11/07/2016

The report warned consumer spending is likely to remain 'muted at best' in the coming months
The report warned consumer spending is likely to remain 'muted at best' in the coming months

Consumers' spending grew at the weakest rate seen in over two years in the run-up to the EU referendum, according to an index.

The report from Visa warned that unless some uncertainty is swept away and confidence starts to lift, consumer spending is likely to remain "muted at best" in the coming months.

Visa's UK Consumer Spending Index recorded a 0.9% annual rate of growth in June - up only slightly compared with a rate of 0.8% in May, which marked a 27-month low.

The report said that on average across the last three months, the annual rate of growth has been 1.4%. This is the weakest growth rate for any quarter since a 1.2% rate of growth in the first three months of 2014.

Within the figures for June, spending at hotels, bars and restaurants increased by 3.3% annually - the weakest rate seen since January 2013. This had been the best-performing sector in the past year.

Spending on recreation and culture grew more strongly than the other categories measured in June, with a 5.8% annual increase.

Spending at hotels, restaurants and bars saw the second highest growth of all the categories measured in June - despite seeing the weakest growth in nearly three-and-a-half years.

Clothing and footwear spending grew by 0.1% annually in June, while spending on food, beverages and tobacco increased by 1.8% annually. Spending on household goods increased by 3.2%.

Meanwhile, expenditure on transport and communication, including flight bookings and car purchases, fell by 4.2%.

The report reflects overall consumer spending, not just that taking place on cards. It is compiled by Markit.

Annabel Fiddes, an economist at Markit, said: "Unless uncertainty around the outlook shows signs of fading and confidence is once again lifted, it seems likely that consumer spending will remain muted at best as we enter the second half of the year."

Kevin Jenkins, UK and Ireland managing director at Visa, said: "All eyes will be on consumer spending data as we assess the outcome of the referendum.

"With the result coming late in the month, this report doesn't give the full picture but there's a clear trend over recent months showing a slowdown in overall growth."

He continued: "Industry reports of new car sales falling in June provided further evidence that people are holding back on big-ticket purchases."

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From Belfast Telegraph