HOUSEHOLD spending fell by 1.2 per cent in January, while spending in shops was down by four per cent year on year, new figures have revealed.
This marks the first time that consumer spending has fallen since 2013.
According to a new survey by credit and debit card provider Visa, the spending slowdown may be a sign of pre-Brexit caution causing consumers to tighten their purse strings.
Falling car sales led to a 6.5 per cent decline in spending across the transport and communications sector, while spending on recreation and culture dropped by 4.2 per cent to reach an almost seven-year low.
“Consumer spending entered the new year on a downbeat note, falling for the eighth time in the past nine months, as Britons continued to cut back on spending,” said Visa’s chief commercial officer, Mark Antipof.
“Clothing, furniture and household goods bore the brunt of consumers’ caution yet again, while spending on the British high street in general fell sharply as the traditional January sales failed to bring shoppers out in numbers this year.
“The transport and communications sector was another victim of the spending squeeze, posting the sharpest decline of all spending categories. Given the widely reported slump in car sales in recent months, this was perhaps to be expected. “
Annabel Fiddes, an economist IHS Markit, added that Brexit-based concerns were weighing on consumer confidence.
Just last month, the IHS Markit Household Finance Index showed that people’s financial well-being declined at the steepest rate since last September as inflation expectations reached a 47-month high. Meanwhile, demand for unsecured debt rose sharply, and job security declined, adding to the squeeze on households.
However, Fiddes added that the prospect of lower inflation and higher interest rates may cause consumer spending to pick up again later this year.
“Labour market conditions remain tight, with employment at a record-high, which is expected to place greater upward pressure on earnings growth going forward,” she said. “Combined with forecasts of cooling inflationary pressures over the coming months, these factors could lead to a relative improvement in expenditure trends as the squeeze on pay-packets unwinds, although overall trends are likely to remain largely subdued in the current economic environment.”
Samantha Seaton, chief executive of Moneyhub, said that the Visa statistics suggest that British consumers need to start thinking about their financial future.
“There are a number of quick and easy steps that people can take to make their money go further,” she said.
“Using an online tool or app, to track your spending, for example, makes it much easier to stick to a budget. These apps can also highlight where you can make day to day savings like binning those unused subscriptions, as well as notifying you if better rates for your mortgage, credit card, or utilities become available. Not only will this give you peace of mind, but can lead to greater financial wellbeing.”