The latest CSI data signalled a -2.0% year-on-year decline in household spending at the start of the fourth quarter of 2017, following a -0.3% reduction in the previous month. This marked the steepest fall in expenditure since September 2013, and means that 2017 as a whole is on track for its worst performance since 2012.
UK consumer spending declined for the fifth time in the past six months in October, according to the latest Visa CSI data. On an annual basis, expenditure fell -2.0% at the start of the fourth quarter, down from -0.3% in September and the quickest rate of reduction seen for just over four years.
The decline in overall spending volumes appeared to be driven by a sustained reduction in high street expenditure. Notably, Face-to-Face spending fell at the second-fastest rate since April 2012 in October (after May 2017), declining by -5.0% compared to a year ago.
Meanwhile, growth in E-commerce spending slowed further to the weakest in the current sixmonth sequence of expansion (+2.2%). Of the eight broad spending categories covered, Clothing & Footwear noted the most marked drop in expenditure.
Moreover, the -9.0% year-on-year decline was the worst seen since the series began in mid-2009. Recreation & Culture registered the fastest decline in spend since March 2011 (-2.9%), while Food & Drink retailers noted the strongest reduction since March 2014 (-2.0%). Transport & Communication and Household Goods also saw marked falls in spending volumes (-6.9% and -3.8%, respectively). Misc. Goods & Services (which includes jewellery, hair and beauty), registered a +6.5% rise in expenditure. Spending rose by a relatively subdued pace of +3.2% across Hotels, Restaurants & Bars, and modestly across Health & Education categories (+1.7%).
Mark Antipof, Chief Officer – Commercial at Visa, commented: “The pre-Christmas trading season got off to a poor start for retailers with October spending falling at the fastest rate in over four years. The figures are a stark indicator of the strain on household budgets even before the Bank of England’s recent interest rate rise.
Clothing retailers were the worst hit, suffering from the fastest drop in spending since the Index started in 2009. The unseasonably warm weather didn’t help, but the sector has been struggling to increase sales since the beginning of this year. This is reflected more broadly in the high street performance, with spending falling for the sixth month in a row. In contrast, e-commerce continued its upward growth trend as consumers moved even more of their shopping online.
Retailers will now be pinning their hopes on strong performance around Black Friday and Cyber Monday. November’s data will therefore provide the first real clue on how Christmas is shaping up.”
Annabel Fiddes, Principal Economist at IHS Markit, said: “The data add to evidence that falling real wages, muted consumer confidence and lingering uncertainties over the direction of the UK economy are having a substantial impact on spending.”
More details here: Visa UK Consumer Spending Index