Consumers increasingly 'cautious' over spending

Despite both High Street stores and online services heavily discounting goods, December saw customer expenditure fall 1.1 per cent month-on-month.

The data, released in the Visa Europe: UK Expenditure Index December 2011, also showed a decline in expenditure of 0.9 per cent when seasonally adjusted on a quarter-on-quarter basis.

However, there was positive news for the hospitality industry, with hotels and restaurants seeing a 12 per cent increase in consumer expenditure, and spending on clothing and footwear increasing by 6.7 per cent.

Meanwhile transport and communication show a drop in spending of 5.8 per cent. The Visa Europe UK Expenditure Index is based on spending on all Visa debit, credit and prepaid cards. These cards, used to make an average of over 1.9 billion transactions every quarter, account for £1 in £4 of all UK spending.

Variables such as card issuance, preferences and inflation are taken into account before figures are released.

Commenting on December's figures, Dr Steve Perry, commercial director at Visa Europe, argued that consumers were becoming more fiscally "savvy" in the heightened economic climate.

He said: "Consumer spending slowed in December, falling both year-on-year and month-on-month. Against a backdrop of challenging economic circumstances, consumers' uncertainty translated into subdued Christmas spending, despite heavy discounting both on the High Street and online."

"It is clear that consumers have become increasingly savvy and cautious about where they choose to spend."

However, Chris Williamson, chief economist at Markit, the financial information services company which compiles the data, raised concerns that the country may be heading for a double-dip recession.

"A 1.1 per cent drop in consumer spending in December caused expenditure to fall 0.9 per cent over the fourth quarter as a whole. With the consumer accounting for approximately two-thirds of all expenditure in the economy, the downturn clearly adds to worries that the UK may be sliding back into recession," Williamson said.

"The data also highlights the plight that retailers have suffered over the key Christmas trading period, with even online sellers not immune to households' increasing reluctance to spend."