UK household expenditure increased by 0.3% on an annual basis in February.
This was down from the solid 1.5% increase registered in January. Meanwhile, spending on a monthly basis declined slightly in February, following the quickest monthly increase in spending for 16 months in January
The figures come from
Visa Europe’s UK Expenditure Index, which takes card spending data and adjusts it for a variety of factors to create a like-for-like comparison of consumer spending.
Jeremy Nicholds, Director of Commercial Development at Visa Europe, said:
"February’s wet weather put a mild dampener on consumer purchases but wasn’t enough to halt the continued spending recovery in the UK.
"Last month was the fifth in a row to show an improvement in year-on-year spending and while there was a decline from January on a month-by-month basis, this is less significant than the longer term upward trend.
"As the weather improves, this upward momentum should be sustained in the coming months as well.
"While there was less evidence of a half-term boost on spending overall than might have been hoped for, there were undoubted winners in February."
The Visa Europe data shows household goods retailers enjoyed a good February, buoyed by a strengthening housing market which saw a 4.3% year-on-year increase in spending for February in this category.
Internet-based spending rose 4.3% year-on-year for February compared to a 0.9% decrease for shopping on the high street. And hotels and restaurants enjoyed another strong year-on-year increase, up 7.1%.
Paul Smith, Director at Markit, said:
"February’s data suggest the UK economic recovery remains firmly on track. Despite some evidence of poor weather impacting on expenditure, overall spending volumes remained higher than a year earlier as consumers continue to gain in confidence and were willing to raise their spending.
"Based on trends for the quarter so far, I expect household consumption to make a positive contribution to overall GDP figures for Q1. As unemployment continues to fall, housing market activity continues to pick up and real-take home pay finally starts to rise, expect to see the positive trend in consumer spending to be maintained in the coming months."
Improving trends in the UK Expenditure Index were also in line with recent positive economic data flow, including the further expansion of GDP in the final quarter of 2013. Consumer confidence remained well above-trend, and unemployment levels have fallen at a stronger than expected pace, which suggests household spending could strengthen further in upcoming months.
However, expenditure growth in the UK could be dampened by relatively stagnant or falling real wages, though this constraint on spending appears to be unwinding. Households and retailers are also likely to benefit from record-low interest rates, which are expected to support a further expansion of economic activity in the first quarter of 2014.
The Visa UK Expenditure Index uses card transaction data to provide a robust indicator of total consumer expenditure across all payment methods and is used by a range of stakeholders to gain insights into consumer spending, including HM Treasury.
It is based on spending on all Visa debit, credit and prepaid cards which are used to make an average of over 1.9bn transactions every quarter and account for £1 in £3 of all UK spending.
Card spending data figures are adjusted for a variety of factors such as card issuance, changing consumer preferences to pay by card rather than cash and inflation. These adjustments mean that these data are distinct from Visa Europe’s business performance and the Index reflects overall consumer spending, not just that on cards.