New data from
Visa Europeshows that in May showed a year-on-year spending rise of +0.9%, compared to +2.9% in April.
The food and drink sector was a notable hotspot, up +3.3% year-on-year.
The quarterly spending measure also indicated an improvement in underlying expenditure trends (+1.4%), and signalled the strongest quarter-on-quarter rise in spending since November 2012.
Rebecca Harris, Conservative MP and member of parliament's Business, Innovation and Skills Committee commented:
“I find this extremely encouraging news. When you consider that this week the European Central Bank is taking exceptional measures to deal with their fears of deflation on the continent, these statistics from Visa seem to be showing a consistent message that consumer confidence is returning to the UK. It really does look our long time economic plan is starting to bear fruit!
“Recently families are starting to feel the benefits of policies like the cut in income taxes and freezing fuel duty. What I think is particularly encouraging is that over 80% of that spending is on debit cards rather than credit cards. It’s coming out of family bank accounts and not shoved being on credit cards.”
The data comes from the Visa UK Expenditure Index, based on spending on all Visa debit, credit and prepaid cards which account for £1 in £3 of all UK spending.
Jeremy Nicholds, Executive Director of Commercial Development at
Visa Europe, said:
"Any post-Easter lull wasn’t enough to disrupt an eighth month of the consumer spending recovery.
"In particular, the food sector looks far healthier than it has done for a while with two consecutive months of rising spending for the first time since mid-2010.
"Online spending enjoyed a very strong month and with an armchair World Cup in June and July, spending on the sofa looks set to continue to grow too."
The clothing and footwear recorded a strong growth rate of +5.1% in May but, in contrast, the household goods sector, which includes spending at DIY stores, saw spending growth weaken to a six-month low of +0.8%.
And spending online continued to outperform expenditure through face-to-face and mail/telephone order categories, suggesting that retailers with a strong internet presence remain strong beneficiaries of the recent upturn in household spending.
Furthermore, expenditure via online was up a sharp +5.3% on the year in May, and signalled the best performance for five months.
Paul Smith, Director at Markit, said:
"As we now move into a new phase of the economic recovery all eyes are on wages and whether a sustained reversal of the hit to living standards seen during recent years finally arrives.
"A positive uplift in real wages is surely crucial to whether consumer spending growth breaks free from the relatively modest annual increases we’ve seen on average in recent months."
The Visa UK Expenditure Index uses card transaction data to provide a robust indicator of total consumer expenditure across all payment methods and is used by a range of stakeholders to gain insights into consumer spending, including HM Treasury.
It is based on spending on all Visa debit, credit and prepaid cards which are used to make an average of over 1.9 billion transactions every quarter.
Working with Markit, these card spending data figures are adjusted for a variety of factors such as card issuance, changing consumer preferences to pay by card rather than cash and inflation. These adjustments mean that these data are distinct from Visa Europe’s business performance and the Index reflects overall consumer spending, not just that on cards.