Sales in the first month of the year have dipped for the first time since 2013, with a sharp decline in high street spending (-4%) and slower growth in online (+1.5%). Household goods saw moderate declines in the month compared with the hardest-hit sectors, such as transport & communication (-6.5% on the year) and recreation & culture (-4.3%).
The figures are the latest from the Visa UK Consumer Spending Index , which revealed that household spending fell by -1.2% year on year in January, following a -1% drop at the end of last year. The latest reduction was the quickest seen since last October, and indicates that spending has now fallen in eight of the past nine months.
A major factor weighing on consumer spending is the sustained squeeze on income, as increases in living costs continue to outstrip growth in average earnings. Consumer confidence also remains relatively weak, says Visa, due to a combination of declining purchasing power, uncertainties tied to Brexit negotiations and signs of a slowing UK economy.
Expenditure fell across the majority of broad spending categories but, whilst household goods recorded a fall in expenditure volumes, the decline was moderate when compared with other sectors, such as recreation & culture, which registered the strongest fall in spending for nearly seven years (-4.3%). January’s figures was also an improvement on the -3.5% decline reported in the household goods category in December 2017.
Visa chief commercial officer Mark Antipof commented: “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. 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 only increases were seen in hotels, restaurants & bars (+3.7% compared to a year ago), albeit at a slower pace than seen in December (+4.9%), and miscellaneous goods & services, which includes health & beauty and jewellery, (+6.1%).
Mr Antipof believes this spend was the British public tackling “the January blues,” adding that “consumers continued to prefer small treats over big tickets items.”
The decline in overall consumer spending at the start of 2018 was centred around a further reduction in face-to-face expenditure, as spending rose across e-commerce categories. On an annual basis, face-to-face in-store expenditure fell for the ninth month running in January.
Notably, the rate of reduction quickened from December (-2.6% year-on-year) to the fastest for three months (-4%). Meanwhile, growth in e-commerce channel spend slowed to +1.5% year-on-year, which was the slowest rate of expansion seen since the current upturn began in May 2017.
On a positive note, the labour market remains in good shape, with the unemployment rate holding at a four-decade low of 4.3%. However, this has yet to translate into stronger earnings growth which could help ease the pressure on households’ budgets.