The UK economy enjoyed a further improvement in consumer spending during July, with household expenditure rising for the tenth successive month on an annual basis. Encouragingly, consumer spending rose in six of the eight sectors, suggesting that the recovery of consumer spending is becoming increasingly broad-based.
Latest data from the Visa Europe: UK Expenditure Index indicated that spending rose solidly on an annual basis in July, up +2.4%. This was an improvement upon June’s +0.5% rise, and the second-strongest year-on-year increase in expenditure since April 2010. However, spending volumes were down slightly when compared to the previous month (-0.6%).
Food Drinks retailers continued to benefit from the sustained upturn in expenditure. Spending in this sector was up +1.7% year-on-year in July, down slightly from +2.5% in June. A similar trend was recorded at Hotels, Restaurants Bars, which saw expenditure rise by +8.1% on an annual basis in July, down from +9.3% in the prior month. Spending on Household Goods also rose over the year (+4.6%), following only a marginal rate of increase in June (+0.2%).
However, expenditure on Clothing Footwear declined modestly (-1.7%), offsetting a +1.8% rise in June.
The high street saw another month of improved spending during July, with expenditure rising by +1.9% on the year, up from +0.9% in June. Online retailers also saw a strong performance over the month, with spending volumes up by +3.4% compared to July 2013.
Natasha Toothill, Director of Retail at Visa Europe said:
“Consumer spending rose strongly at 2.4% in July. This was the second-best showing since 2010, just behind an exceptionally strong April which was boosted by Easter sales.
“Spend at hotels, restaurants and bars enjoyed particularly strong growth, up 8.1% on last year, as consumers splashed out on summer holidays and eating out. With low inflation, strong employment growth and rising consumer confidence, Britons are edging away from recession spending habits to indulge more on the things they enjoy.
“The high street continues a summer comeback with another month of growth in face-to-face spending, perhaps due to the summer’s warm weather and major cultural and sporting events, which bring with them an influx of domestic and foreign tourists.”
Paul Smith, Senior Economist at Markit said:
“Growth of UK consumer spending was sustained at a marked level on the annual measure in July, and the upturn remained broad-based. Household goods registered a noticeable pick-up in growth, while other sectors such as Food Drink continue to show solid signs of recovery following a period of depressed activity in previous years.
“The data undoubtedly add to the positive news flow on the UK economy evident in recent months. With the labour market tightening, and amid signs of a pick-up in wage inflation, we expect household expenditure to make further positive contributions to GDP growth in the second half of the year not withstanding any surprise hike in interest rates during Q4.”