British consumer spending dropped at annual rate of 0.8% in May
British consumer spending dropped at an annual 0.8 per cent in May after adjusting for inflation, the first decline since September 2013, according to a report by IHS Markit and Visa.
Spending on clothes and footwear dropped 5.2 percent, while spending on household goods fell by 4.1 per cent.
Inflation in the UK has increased over the past year as a weak pound has pushed up the price of imports, making them more expensive for consumers. A weak pound, coupled with lacklustre wage growth, has led to British consumers cutting the amount they spend.
“Our index clearly shows that with rising prices and stalling wage growth, more of us are starting to feel the squeeze,” Visa managing director Kevin Jenkins said.
“Retailers of non-essential goods were among the worst hit, with clothing and household goods seeing sharp declines in sales. The experience sectors continued to record some growth, though at much softer rates, suggesting consumers were reining in their discretionary spending.
“Bricks-and-mortar retailers had a particularly challenging month, with sales dropping at the quickest level in over five years, at a time when warmer weather and the May bank holidays would usually drive shoppers on to the high street. Online retailers, on the other hand, fared well, with spend up 6.9%,” Jenkins added.
Josh Beer of The Illustrious Pub Company in Cambridgeshire told Visa:
“More of our customers gravitated towards deals and offers in the past month, it feels as though they were biding their time, and cutting back until they became more confident in the economy.
“We also face other challenges – price rises and minimum wage increases in particular are forcing us to explore ways to make our business more cost-efficient. We’ve scaled back our services and no longer offer add-ons such as contract catering.