The Visa Europe: UK Expenditure Index indicated a further solid increase in consumer spending in February, with expenditure increasing through all three monitored channels. Sector data indicated that expenditure growth was sustained in key sectors such as Food, Beverages Tobacco, Hotels, Restaurants Bars and Household Goods in February.
Household spending rose +1.2% year-on-year in February, thereby extending the current sequence of annual expenditure growth to five months. However, spending fell marginally on the monthly measure (-0.5%), following a strong January (+2.1%).
As has been the case throughout much of the past two years, Hotels, Restaurants Bars saw the strongest increase in expenditure in February (+9.0% on the year). Household Goods (+3.6%) and Food, Beverages Tobacco (+2.7%) also saw solid spending growth. Meanwhile, both Recreation Culture (+1.1%) and Transport Communication (+0.8%) saw increases in expenditure for the first time in six and four months respectively.
At -4.6%, household spending continued to decline in Misc. Goods Services (which includes hairdressing and jewellery), while Clothing Footwear retailers noted reduced spending for the third successive month (-3.4% on the year).
High Street spending rose solidly for the second month running (+1.5% year-on-year), and continued to outpace Online expenditure growth (+0.8% on an annual basis).
Kevin Jenkins, UK Ireland Managing Director Visa Europe said:
“Household spending may not have been quite as strong as January, but February was still another good month for the consumer economy. With household incomes returning to pre-recession levels and low prices on food and fuel, consumer confidence looks in decent shape.
“British consumers look to be spending more on the things they enjoy. Dining out was clearly popular again in February as hotels, restaurants and bars saw a bumper month, while spend on recreation and culture bounced back for the first time since August 2014.
“On the flip side, spending on clothing fell for a third month in a row in February.”
Paul Smith, Senior Economist at Markit said:
“Despite a slight monthly drop following a strong January, February’s Visa Europe: UK Expenditure Index signalled that underlying year-on-year growth of consumer spending remains solid. With the exception of Clothing Footwear, retail-facing sectors seemed to perform particularly well, especially household goods which enjoyed its best performance for seven months.
“Overall, we expect consumer spending to make ongoing positive contributions to total UK economic activity, with the data indicative of a 0.6% q/q rise in GDP over the first quarter as a whole.”