September saw an increase of 1.5% in spending on cards, the second-fastest increase in a year.
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, providing a robust indicator of consumer spending habits.
Household expenditure fell on an annual basis in September (-1.2%), down from a slight increase in August (+0.8%).
However, this was largely a result of displaced consumer spending this time last year following the London 2012 Olympics in August last year.
There was a positive trend in Recreation & Culture and continued growth in Hotels & Restaurants, two areas not traditionally covered by other widely-reported barometers of consumer spending.
Paul Smith, Senior Economist at Markit said:
“Spending continued to rise in September, and at a solid and consistent pace. Following on from August, the latest data mark one of the best back-to-back monthly growth periods of consumer expenditure in recent years and add further to the recent positive economic news flow in the UK.
“Although annual spend was slightly down, this seems more a function of the displacement of spending caused by the Olympics in 2012, making comparisons with last year difficult to read.
“With confidence continuing to improve, the recovery of expenditure evident since the turn of the year looks set to continue in the coming months. That said, spending volumes remain below their pre-2008 peak.”
Visa Europe’s UK Expenditure Index monitors eight broad sectors. Summary data for annual growth rates in September and August 2013, show spending fell in six of the eight broad categories in September.
The greatest fall in expenditure was recorded in Health & Education, followed by Food, Beverages & Tobacco. Consumer spending also decreased in Transport & Communication, Household Goods, Clothing & Footwear and in Recreation & Culture categories.
Meanwhile, household expenditure increased in 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), and also rose at Hotels & Restaurants.
Household expenditure decreased in both Face-to-Face and Online spending channels in September, but increased slightly in Mail Order/Telephone categories.
Face-to-Face spending fell by -2.3% in September, down from an increase of +1.1% in August. Online expenditure also declined in September (-0.6%), following a slight increase in August (+1.1%). In contrast, consumer spending increased again through Mail Order/Telephone categories in September (+0.3%), but at the weakest rate in 2013 so far.
Jeremy Nicholds, Director of Commercial Development at Visa Europe said:
“September heralded another good month for consumer spending in the UK, with a rise of +1.5% on the month before. With spending in August also having increased by +1.6%, this means that September and August registered the fastest expenditure increases in a year. Moving into the fourth quarter of the year, this puts the UK economy in good stead with consumers slowly gaining in confidence ahead of the peak trading season.
“The year-on-year decline in consumer spending was the result of a very strong performance in September last year which witnessed the largest monthly rise in spending for nearly three years.
“Therefore the improving trends in the monthly and quarterly spending measures provide a better insight of household expenditure for this month. The remainder of the year will therefore provide a more unblemished reflection of the state of consumer spending.”