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Consumer spending accelerated in May, underpinned by the strongest growth momentum in seven years

Visa Europe | Visa

3 min read Partner content

- Consumer spending rose +2.6% on an annual basis in May, rounding off the strongest three month average increase in expenditure since January 2008 - Broad-based growth led by spending in discretionary areas including Hotels, Restaurants Bars and Recreation Culture - Fastest annual rise in high street spending for over a year

Household spending continued to rise in May, according to the latest Visa Europe: UK Expenditure Index data. Consumer spending rose +2.6% on an annual basis in May, following a +2.0% rise in April. Looking at the last three months collectively, the data signalled the strongest three month average increase in expenditure for more than seven years.

Expenditure increased in five out of the eight broad sectors covered. Hotels, Restaurants Bars remained a key driver of growth in spending (+10.3%), while Misc Goods Services which includes hairdressing and jewellery also saw a notable increase in expenditure.

Expenditure growth was strong across both online and in-store channels, with high street spending registering the biggest rise (+3.2%) in just over a year.

Kevin Jenkins, UK Ireland Managing Director Visa Europe said: “In May consumer spending growth was at its highest level since July 2014, as UK consumers felt the benefits of deflation coupled with a pick-up in real wage growth.

“As the costs of essentials fell, UK consumers indulged themselves on things they enjoy. The two May Bank Holidays combined with the half-term break saw people spend more on going away, dining out and entertainment.

“In contrast, clothing retailers struggled to reverse the downward trend we’ve seen since November 2014, although spending dropped at a much lower rate in May than in April.

“With more money in their pocket and a spring in their step, consumers look set to continue their spending momentum into the second half of the year.”

Paul Smith, Senior Economist at Markit said: “A very strong set of UK Expenditure Index data for May highlighted that consumer spending growth has moved up a gear, with households raising their expenditure across a broad-based set of goods and services heading towards summer.

“Driven by a combination of merchant discounting, rising real wages and increased confidence in the wider macro-economic environment, underlying consumer spending growth was the best seen for over seven years. These numbers suggest that the UK economy is firmly on course to enjoy a strong pick-up in GDP growth for Q2 2015.”

What UK businesses are saying

Visa is tracking the sentiment of several small businesses across the UK on a monthly basis, asking about their views on the economy, business conditions and forecasts for the month ahead.

Tony Bailey, Top Notch Hair Beauty, Manchester: “Our revenue surged by 34% in May as compared to April, as our customers seemed to spend much more per visit. Many went for extra treatments or bought products to take home. I suspect this is due to the general election being out of the way and people now feeling more certain about their finances.

“We expect an even better month in June as people tend to spend more money on looking good before going on summer holidays.”

Pauline Cusack, Guest House Birmingham: “Our guest house had a great month, with revenue up 15% on May 2014. Our guests seem to be benefitting from higher pay and longer contracts that comes with local businesses’ expansion and growth.

“Overall we feel optimistic about the outlook for our business. In pubs and restaurants in the area the atmosphere is very positive too as people seem to have much more money in their pockets.”

Quan Nguyen, Chi Café, London: “We had another month of steady growth in June. Apart from local office workers who make up the majority of our customer base, we also saw an increase in passing trade, mostly from people coming to visit London during the Bank Holiday weekends and the half-term break.”

Read the most recent article written by Visa Europe - Latest spending figures show record highs

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