Consumer spend on food and online rise sharply, pushing spending recovery into eighth consecutive month

May saw UK consumer spending lose some inevitable momentum following the Easter-related boost in April, but nonetheless annual growth was maintained, extending the current run of expansion to eight months. May data from the Visa Europe: UK Expenditure Index showed a year-on-year spending rise of +0.9%, compared to +2.9% in April.

Food Drink was a notable hotspot in terms of spending growth during May, which rose +3.3% year-on-year, and the first back-to-back rise in the category since mid-2010. While volumes may have been boosted by the so-called supermarket price war, the latest reading was still relatively strong against April’s Easter-related increase and raises hopes of a long-for hoped turnaround in this sector’s fortunes following a sustained period of decline.

Clothing Footwear also recorded a strong growth rate of +5.1% in May but, in contrast, the Household Goods sector, which includes spending at DIY stores, saw spending growth weaken to a six-month low of +0.8%.

Spending online continued to outperform expenditure through Face-to-Face and Mail/Telephone Order categories, suggesting that retailers with a strong internet presence remain strong beneficiaries of the recent upturn in household spending. Furthermore, expenditure via online means was up a sharp +5.3% on the year in May, and signalled the best performance for five months.

Jeremy Nicholds, Executive Director of Commercial Development at Visa Europe said:

“Any post-Easter lull wasn’t enough to disrupt an eighth month of the consumer spending recovery. In particular, the food sector looks far healthier than it has done for a while with two consecutive months of rising spending for the first time since mid-2010.

“Online spending enjoyed a very strong month and with an armchair World Cup in June and July, spending on the sofa looks set to continue to grow too.”

Paul Smith, Director at Markit said:

“While there was a fall in spending volumes on the month in May, another annual rise in spending suggests that growth is becoming entrenched with the positive trends in areas such as Food Drink and Clothing Footwear pointing to increased confidence amongst consumers.

“As we now move into a new phase of the economic recovery all eyes are on wages and whether a sustained reversal of the hit to living standards seen during recent years finally arrives. A positive uplift in real wages is surely crucial to whether consumer spending growth breaks free from the relatively modest annual increases we’ve seen on average in recent months.”