Visa UK CSI data signalled a renewed fall in consumer spending during May, with expenditure down -0.8% on the year. This followed a +0.3% increase in April, and was the first reduction recorded since September 2013.
The broad sector and channel splits, which unlike the headline figure are not adjusted for seasonality, were impacted by the late timing of Easter (April) compared to last year (March).
Half of the eight broad spending categories noted lower spending volumes compared to one year ago. Transport & Communication (-7.9%) and Clothing & Footwear (-5.2%) noted the strongest rates of reduction. Notably, it was the quickest fall in expenditure across Clothing & Footwear categories since April 2012. Household Goods (-4.1%) meanwhile saw the quickest drop in spend since March 2013.
Food & Drink retailers saw a marginal decline in expenditure during May (-0.6%).
In contrast, Misc. Goods & Services (which includes hairdressers and jewellery) saw the strongest increase in spend (+7.1%). Hotels, Restaurants & Bars (+3.3%) and Recreation & Culture (+2.2%) meanwhile registered relatively modest increases in expenditure.
Split by channel, household spending declined solidly through Face-to-Face channels (-5.3%), to mark the quickest drop since April 2012. On the other hand, e-commerce posted a +6.9% rise in spend after a marginal fall in April (-0.3%).
Kevin Jenkins, UK & Ireland Managing Director at Visa commented:
“Consumer spending fell for the first time in nearly four years in May, following some marked slowdowns in growth since the beginning of the year. Our Index clearly shows that with rising prices and stalling wage growth, more of us are starting to feel the squeeze.
“Retailers of non-essential goods were among the worst hit, with clothing and household goods seeing sharp declines in sales. The experience sectors continued to record some growth, though at much softer rates, suggesting consumers were reining in their discretionary spending.
“Bricks-and-mortar retailers had a particularly challenging month, with sales dropping at the quickest level in over five years, at a time when warmer weather and the May bank holidays would usually drive shoppers on to the high street. Online retailers, on the other hand, fared well, with spend up 6.9%.”
Annabel Fiddes, Economist at IHS Markit said:
“Latest data revealed a renewed fall in UK consumer spending, with the Visa UK CSI posting a -0.8% fall in total expenditure during May. This was down from a +0.3% increase in April, and the first decline in spending for nearly four years. The overall reduction was driven by a fall in spending on the High Street, which declined at the quickest pace since early-2012.
“The outlook for consumer spending continues to look relatively bleak, with households facing faster increases in living costs and muted wage growth. The squeeze on household finances is likely to get worse as the Bank of England forecasts faster increases in consumer prices in the coming months. Combined with relatively low levels of consumer confidence, uncertainty around the outcome of Brexit and a slowdown in UK economic growth, it’s likely we will continue to see weaker expenditure trends at least in the near-term.”
Visa’s UK Consumer Spending Index
| Visa’s UK Consumer Spending Index Apr | Apr – 17 | May – 17 |
| Overall Spending Annual % Change (SA) | +0.3% | – 0.8% |
| Overall Spending Monthly % Change (SA) | +0.3% | -1.9% |
| Commerce Spending Annual % Change (NSA) | +0.1% | -5.3% |
| Commerce Spending Annual % Change (NSA) | -0.3% | +6.9% |
E-commerce and Face-to-Face Spend
Driving the decline in overall expenditure was a solid reduction in Face-to-Face spending during May. In contrast, expenditure growth rebounded across E-commerce categories.
On an annual basis, expenditure declined by -5.3% through Face-to-Face channels in May. This followed a slight increase in April (+0.1%), which was likely supported by the timing of Easter this year, and continued the trend of falling expenditure seen through the first quarter of the year. Furthermore, the rate of reduction was the quickest seen since April 2012.
In contrast, E-commerce spending rose at a robust pace in May (+6.9% year-on-year), after a marginal fall in April (-0.3%).
Spending by Sector
Visa’s UK Consumer Spending Index monitors eight broad sectors. Summary data for annual growth rates in April & May 2017, which are not adjusted for seasonality and trading days, are provided in the table opposite.
Half of the eight broad spending categories noted lower expenditure in May. The steepest drop was seen in Transport & Communication (-7.9% on the year), followed by Clothing & Footwear (-5.2%). Household Goods meanwhile noted a solid reduction in spending volumes (-4.1%), while Food & Drink retailers noted a marginal decline (-0.6%).
At the other end of the table, the strongest increases in expenditure were noted in Misc. Goods & Services (which includes hairdressers and jewellery) (+7.1%) and Health & Education (+6.7%). Hotels, Restaurants & Bars (+3.3%) and Recreation and Culture (+2.2%) also saw increases in spend, albeit relatively modest.
What UK businesses are saying
Visa is tracking the sentiment of several small businesses across the UK on a monthly basis, asking about their views on the economy, business conditions and forecasts for the month ahead.
Tony Bailey, Top Notch Hair & Beauty, Manchester:
“Although our average bill remained the same, the number of visits was significantly lower in May. We feel this may have been due to people saving for holidays and increased competition in our area. Food price rises could have an impact on us too, as people may have less money to spend on pampering themselves.”
Josh Beer, The Illustrious Pub Company, Cambridgeshire:
“More of our customers gravitated towards deals and offers in the past month, it feels asthough they were biding their time, and cutting back until they became more confident in the economy. We also face other challenges -price rises and minimum wage increases in particular are forcing us to explore ways to make our business more cost-efficient. We’vescaled back our services and no longer offer add-ons such as contract catering.”
Gayle Haddock, Carry me home (Children’s Clothes), London:
“We had more sales in the first half of the month, as parents bought holiday essentials for their kids. But overall revenues didn’t improve much from the previous month. Since becoming an online-only retailer, we’ve had to look for ways to be savvy on social media to promote our stock.”