Online spending grows at fastest rate for 16 months as the experience economy powers ahead
- Total consumer spending increases by +2.5% year-on-year in April
- E-commerce growth rate of +8.4% year-on-year but face-to-face expenditure is broadly flat (+0.2% year-on-year)
- Clothing and footwear sees biggest fall in year-on-year spending since September 2014
April signalled a further solid rise in overall UK household expenditure, with Visa Europe's UK Consumer Spending Index registering a +2.5% year-on-year increase. This was up from +2.3% in March, and suggests that strong growth momentum has carried through into the second quarter.
Encouragingly, seven of the eight broad spending categories noted higher spending volumes. Some of the strongest rates of expansion were seen across Recreation & Culture (+7.9% year-on-year), Hotels, Restaurants & Bars (+6.6%) and Household Goods (+3.0%). Expenditure growth meanwhile slowed to a five-month low across Food & Drink categories (+1.7% on the year), and rose only slightly across Transport & Communication (+0.6%). The only sector to report reduced expenditure was Clothing & Footwear (-2.8% year-on-year), where poor weather was likely to have affected the sales of spring/summer ranges. Furthermore, the rate of reduction quickened from that seen in March (-1.7%).
Cold weather was also likely to have been behind relatively flat high street spending in April (+0.2% on the year). Subsequently, expenditure growth improved through e-commerce channels, with April's +8.4% annual increase the fastest seen since December 2014.
Kevin Jenkins, UK & Ireland Managing Director at Visa Europe commented:
“Growth in consumables remains evident, but consumer spending is increasingly focused on the experience economy. Eating out, booking holidays and discovering new experiences are all driving spending growth at a time when the lower cost of living is creating higher disposable incomes. In a month of mostly growth, the only sector to disappoint was clothing and footwear, again highlighting this shift.
“A very strong month for online sellers suggests much of the experience economy is being driven by pre-booking of activities online. While online prospered, face-to-face spending was relatively flat, highlighting the current discussion about the future shape of the high street as well.
“Eyes will now be on May, with a sunny start to the month providing promise for the high street but also a further fillip for restaurants and hotels looking to capitalise on our desire for experiences.”
Annabel Fiddes, Economist at Markit said:
“April data indicated that strong spending growth momentum carried over into the second quarter of 2016, with Visa Europe’s UK Consumer Spending Index registering a +2.5% year-on-year rise in expenditure.
“The wintry weather in April did mean that the high street lost out overall, with spending broadly flat from the previous year. However, this led to a steep increase in online spend, where growth hit a 16-month high on an annual basis.
“The prolonged spell of poorer weather also reduced sales at Clothing & Footwear retailers for the second month in a row, as people put off purchasing their spring/summer ranges. Nonetheless, consumers registered higher expenditure across all other areas of spend, including on day trips, meals out and home furnishings.
“As we head into the summer, however, weaker global economic conditions and an increasingly uncertain UK economic outlook could dampen expenditure growth in the near future.”
