The latest Visa Europe: UK Expenditure Index data signalled a further solid increase in consumer spending in October. Expenditure was up +2.1% on an annual basis, up from a +1.9% rise in September, and the strongest annual rate of growth for three months. Spending also rose slightly on the quarterly and monthly spending measures in October.
Sector data indicated that the majority of spending categories saw greater expenditure in October, with Hotels, Bars Restaurants (+10.0%) and Recreation Culture (+5.3%) categories seeing the sharpest increases in spending. Clothing Footwear (+3.7%) and Household Goods (+3.7%) retailers also saw marked growth in expenditure, while spending rose at a solid clip in Food Drink categories (+2.1%).
The only two sectors to see reduced spending were Heath Education and Transport Communication, though the rate of decline was marginal in both cases.
Expenditure growth was supported by higher spending in both face-to-face (+1.0%) and e-commerce (+4.3%) categories in October. Though only slight, it was the first time that spending on the high street had increased for two months.
Kevin Jenkins, Managing Director UK Ireland at Visa Europe said:
“Overall spending reached a three-month high in October, as a mix of rising wages, improving job prospects and near-zero inflation gave households more money to spend and boosted the buying power of their pounds.
“The warm autumn weather and the school half-term break coinciding with Halloween meant people were spending more money on going away, eating out, and entertaining. The same factors might have brought more shoppers on to the high street too; with bricks-and-mortar experiencing an encouraging revival.
“Looking forward, overall spending looks set to reach higher level this month, as both online and store based retailers are preparing to lure customers in with bigger and better Black Friday deals. It remains to be seen though whether this will come at the expense of trading later in the festive period.”
Annabel Fiddes, Economist at Markit said:
“Household spending increased solidly in October, with the Visa Europe: UK Expenditure Index pointing to the strongest annual rate of growth for three months. Encouragingly, a return to the high street was seen, with face-to-face spending rising slightly after stagnating in September. Looking at the spending category data, growth was relatively broad-based with expenditure up on household goods and clothing and footwear, but also on day trips and dining out.
"Improved expenditure trends are likely to extend to the end of the year, supported by positive economic factors; employment has hit a fresh high, near-zero inflation has helped to boost spending power, and interest rates remain at record lows. However, concerns of softer growth amid a slowdown in China may weigh on confidence in the coming months.”
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.
Imogen Hawthorne, Paisley Immy Cakes, Birmingham:
“We’ve transitioned very nicely from the wedding season to the festive season and have already seen the start of the Christmas orders, with more of our customers treating themselves to more grand, extravagant and rich festive cakes. With the generous orders that have already come in, we expect sales to increase significantly in the run up to Christmas.”
Quan Nguyen, Chi Café, London:
“Our sales remained strong in October. The slight dip in the number of visits from local office workers during the school half-term break were compensated by passing trades, mainly from travellers visiting London. Average spend increased slightly too, as customers were more willing to spend on treats or opted for more expensive dishes.”
Tony Bailey, Top Notch Hair Beauty, Manchester:
“As expected, October was a quieter month for us as many of our customers went away for the half term break. But we are hopeful this will change in November as people are now back and
likely to treat themselves ahead of the festivities.”