'Glimmer of hope' for UK economy

The latest data provided by the Visa Europe UK Expenditure Indexalso revealed that overall expenditure declined by 2.2 per cent year-on-year during January.

The Index, published on a monthly basis, uses card transaction data and adjusts it for a variety of factors to create a like-for-like comparison of consumer spending. This provides a robust indicator of total consumer expenditure across all payment methods.

Online spending has seen marginal growth of 0.5 per cent following a decline in December for the first time since January 2010. However, 'face-to-face' shopping on the UK's high street, and mail/telephone orders, registered annual spending falls.

Commenting on this month's figures, Dr Steve Perry, commercial director at Visa Europe, described the volatility in growth rates in online versus offline spending as "indicative of canny consumers' continued pursuit of value for money in these straitened times".

The Index also breaks consumer spending down on a sector-by-sector basis. The January 2012 data demonstrated that of the sectors that record year-on-year growth, Hotels and Restaurants saw the strongest rise of 4.0 per cent. This does, however, represent a significant slowdown when compared to the 12.0 per cent rise seen only a month previously, in December 2011.

The Clothing and Footwear sector also saw growth, registering an increase of 3.3 per cent.

The Index identified declines in the Food, Beverages and Tobacco and the Transport and Communications sectors. The sharpest reduction was recorded in Misc. Goods and Services which saw spending fall by 10.2 per cent – the biggest fall in over two-and-a-half years of available data.

Dr Perry argued that January's 0.4 per cent month-on-month rise offers "a glimmer of hope for the economy at the start of the year".

However, he did acknowledge that the quarter-on-quarter figures were more revealing and signalled that "the underlying trend for consumer spending continues to be flat".

Chris Williamson, chief economist at Markit, the financial information services company which compiles the data, argued that the slight rise in consumer spending shows that "household confidence picked up at the start of the year".

But he was more critical of the economic situation as a whole, arguing that January's figures still demonstrate "a widespread reluctance among households to spend due to job market worries, low pay growth and uncertain economic outlook".

"While the UK consumer mood may have brightened a little, we should not rely on higher spending to help drive economic recovery in coming months," he said.