Visa Europe’s UK Expenditure Index records a 1.6% decrease in month-on-month consumer spending in October, following a modest increase of 1.5% in September.
Year-on-year spending increased last month by 0.3% compared with October 2012.
Labour MP Andy Love, who sits on the Treasury Select Committee, welcomed increased spending compared with 2012, but warned: “We need to ensure this does not contribute a rise in personal debt.”
He added: “The increased use of credit cards does boost the economy by increasing the money supply but this can raise inflation levels.”
Jeremy Nicholds, Director of Commercial Development at Visa Europe, said:
“Monthly consumer spending remains volatile, borne out by a 1.6% decrease, as consumer confidence remains fragile amid fears over inflation and energy bill rises.”
Mr Love said there has not been a rebalancing of the economy towards business investment and net profits.
“Business investment remains at 25% below its pre-recession peak and while an increase in consumer spending could give the economy a shot in the arm, it’s vital Government has a joined up overarching plan for growth if we are to catch up with our international competitors,” he said.
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Visa Europe’s UK Expenditure Index takes card spending data and adjusts it for a variety of factors to create a like-for-like comparison of consumer spending.
“For the first time since May, underlying trends in consumer spending returned to growth in October, with the quarterly measure of spending registering a 0.7% increase,” Mr Nicholds said.
“This good news was bolstered by a modest 0.3% increase in annual consumer spending in October.”
Online spending was up 2.9% on October last year, but High Street remains subdued, with a decline of 1.7% on the year.
Declines in annual spending trends were recorded in Food & Beverages (-4.5%) and Clothing & Footwear (-5.7%).
Paul Smith, Senior Economist at Markit, said:
“Following two months of solid growth, there was a minor set-back for UK consumer spending in October with expenditure a little down on the month.
“Nonetheless, a return to modest expansion on the annual measure and a solid rate of quarterly growth continues to sit nicely with other indicators of economic activity, which have pointed to a clear improvement in the UK economic climate during recent months.”
Visa Europe’s UK Expenditure Index monitors eight broad sectors. Household spending increased in four of the eight broad categories in October. The Misc. Goods & Services category, which includes spending on personal care (e.g. hairdressing), personal effects (e.g. jewellery), and financial services (e.g. insurance premiums) noted the strongest increase, while spending increased for the first time since March in Recreation & Culture categories.
Meanwhile, Clothing & Footwear noted the strongest reduction in spending, closely followed by Food, Beverages & Tobacco. Expenditure also decreased in Health & Education and slightly in Household Goods.
Mr Smith said the majority of households remain in a “cautious mood following a sustained period of wage stagnation and rising living costs, with any usage of discretionary spend being carefully managed”.