Wet weather hits the high street, but consumer spending maintains growth at end of Q1
- Consumer spending rises by +2.3% year-on-year
- Strong increases in expenditure seen in Recreation & Culture (+5.6%) and Hotels, Restaurants & Bars (+5.3%), but spending at Clothing & Footwear retailers declines (-1.8%)
- Growth led by higher e-commerce spending (+4.2%), as face-to-face expenditure falls slightly (-0.9%)
UK consumer spending continued its upward trend in March, as shown by Visa's Europe's UK Consumer Spending Index. Spending rose +2.3% on an annual basis at the end of the first quarter, which was similar to the year-on-year increase seen in February (+2.2%). Overall, the average annual rate of growth for Q1 (+2.4%) was the strongest since Q2 2015 (+2.5%). Underlying trends also look positive in March, with the three-month-on-three-month measure posting +0.9%.
Higher expenditure was recorded in half of the eight broad spending categories in March, with growth led by Recreation & Culture (+5.6% on the year) and Hotels, Restaurants & Bars (+5.3%). Food & Drink (+2.5%) and Household Goods (+1.9%) categories also saw strong increases in spending.
However, a relatively cold March is likely to have contributed to a fall in spending in Clothing & Footwear categories during March (-1.8% year-on-year), as consumers may have delayed purchasing their spring/summer wardrobes.
Channel data indicated that greater spending through e-commerce channels (up +4.2% on the year) was a key factor driving total expenditure growth. In contrast, spending fell slightly through face-to-face channels (-0.9%), after a +2.8% increase in February.
Kevin Jenkins, UK & Ireland Managing Director at Visa Europe commented:
“March saw a solid increase in consumer spending, with the leisure and hospitality sectors big winners, perhaps influenced by Mother’s Day and the Easter holiday falling in the same month. Britons made the most of their free time to enjoy family fun, days out and trips away.
“Bad weather looks to have hit demand for Spring and Summer clothing and kept consumers off the high street. Face to face spend dropped nearly 1% as a result, but e-commerce continues to grow strongly with over 4% growth. As we head into Summer, retailers will be keenly awaiting an upturn in the weather, while waiting to see the impact of the living wage on consumer spending.”
Annabel Fiddes, Economist at Markit said:
“The latest Visa Europe UK Consumer Spending Index data rounded off a strong quarter for UK households, with expenditure rising +2.3% on the year in March, up slightly from +2.2% in February. This meant that the average annual rate of growth in Q1 2016 (+2.4%) was the strongest seen since Q2 2015 (+2.5%), and continued to point to a strong and sustained recovery in consumer spending.
“The relatively cold weather in March, including the storm seen over the Easter bank holiday weekend, may well have impacted spending on the High Street (-0.9% on the year) and at Clothing & Footwear retailers (-1.8% ), but spending on days out and in Food & Drink categories continued to show robust growth.
“Looking ahead, it appears that a slight softening in consumer confidence alongside an uncertain economic outlook may pose a downside risk to expenditure growth in the next few months.”
