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Low inflation and falling unemployment continues growth in consumer spending

Visa Europe | Visa

3 min read Partner content

- Expenditure growth moderates but remains strong in June (+1.4% year-on-year) - Higher consumer spending supported by greater spending on going out and household goods - Online spending sees sharpest increase in expenditure of all three monitored channels

Consumer spending rose +1.4% on an annual basis in June, down from a +2.5% in May, but nonetheless signalling a further solid increase in expenditure. Moreover, June's figure rounded off the strongest quarter for household spending on an annual basis since Q2 2010. Underlying growth momentum also remained strong looking forward, with the quarterly spending measure remaining in positive territory in June (+0.9%).

At the sector level, Hotels, Restuarants and Bars continued to record a marked increase in expenditure (+6.9% on the year), while Recreation Culture categories registered the sharpest rise in spending volumes since the series began six years ago (+5.8%). Strong growth was also seen in Household Goods, where the rate of expansion reached an 11-month high (+4.0%), and Misc. Goods Services (which includes hairdressing and jewellery) (+2.5%).

Meanwhile, Clothing Footwear retailers saw a further decline in expenditure, albeit only slight (-0.9%), and Food Drink categories recorded the second decline in spending in the past three months (-1.6%).

Online expenditure was a key driver of overall growth in June, and saw the sharpest increase in spending for 18 months (+6.6%).

Kevin Jenkins, UK Ireland Managing Director Visa Europe said:

“Based on their spending habits there looks to be a sustained feel-good factor among consumers at present. April to June represents the strongest quarter for consumer spending since 2010 and indicates the trickle-down effect of low inflation and falling unemployment.

“Prudent rather than excessive spending looks to be the order of the day, but people are definitely enjoying themselves. Dining and nights out, leisure trips and cultural treats all saw sharp increases in spending in June. In contrast, big summer discounts failed to lift spend on clothing.

“June was also a story of two halves for the high street versus online. The latter was the key driver of growth registering its sharpest increase for 18 months, though for the former the proposal to relax Sunday trading laws offers a fresh chance for the high street to regain its mojo.”

Annabel Fiddes, Economist at Markit said:

“The latest set of Visa Europe: UK Expenditure Index pointed to a further solid rise in household spending in June, despite the rate of growth easing since May. Moreover, the average annual rate of growth over Q2 as a whole was the strongest seen for five years. According to sector data, spending on household goods, day trips and dining out all helped to boost expenditure in June, while spending fell slightly in food drink and clothing footwear categories.

“Looking ahead, stronger underlying economic factors, such as reviving wage growth and rising consumer confidence, are likely to underpin a further increase in household spending as we head into the second half of 2015.”

 

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