The data for April from
VisaEurope’s UK Expenditure Index showed consumer spending declined by 2.5% on a monthly basis, down from the rise of 1.2% in March.
The Expenditure Index is based on spending on all
Visadebit, credit and prepaid cards which are used to make an average of over 1.9 billion transactions every quarter and account for £1 in £3 of all UK spending.
The fall in April follows three successive months of growth.
Vicky Redwood, Chief UK Economist at Capital Economics, told Central Lobby:
“The fall in the expenditure index tentatively suggests that the pick-up in the consumer sector seen since the start of the year is petering out.
“With households’ real pay still falling, it was always looking unlikely that consumers would be able to sustain stronger spending growth.”
On the year, household expenditure increased by 0.5% in April, following a slight increase in March of 0.8%.
Prior to this consumer spending had been declining year-on-year since August 2011.
Consumer spending rose 1.3% on a quarter-on-quarter basis in Q1 2013.
This bounce back from a disappointing performance in Q4 2012 suggested that the UK would avoid another recession following a decline of GDP at the end of last year.
Less timely official data released in late April showed that GDP rose 0.3% on a quarter-on-quarter basis during Q1 2013, confirming the earlier trend suggested by the Visa Europe: UK Expenditure Index.
Online spending increased solidly during April, rising by 6.2% year-on-year; the sharpest increase since September 2011.
The mail order/telephone order category also saw solid growth, and increased by 8.8% over the month, while face-to-face spending declined by 1.9%.
The growth in online and mail order/telephone order categories expenditure helped to support overall annual growth in expenditure.
Dr Steve Perry, Commercial Director at Visa Europe said:
“The overall picture of consumer spending is one of slow growth as evidenced by the 0.5% increase in April compared to the same month in 2012 and the underlying three-month growth rate of 1.1%.
“However, there is clearly continuing volatility from month to month with a marked decrease of 2.5% from March.”
Consumer spending increased solidly in the Misc. Goods & Services category, which includes spending on personal care, personal effects such as jewellery and financial services like insurance premiums.
Growth was also noted in Hotels & Restaurants and Transport & Communication sectors.
Chris Williamson, Chief Economist at Markit, said:
“A poor start to the second quarter raises fears that falling consumer spending could bring an end to the upturn in economic growth seen in the first quarter. Incomes are being increasingly squeezed once again by weak pay growth and rising inflation.
"However, it remains too early to say if this marks the start of a renewed downturn, and it’s reassuring to see that the underlying trend in spending remains much firmer than we saw late last year, especially as much of the weakness in April was confined to the Food & Beverages category.”