Visa Europe's UK Consumer Spending Index registered a further solid increase in household expenditure in February. The index saw spending expand by +2.2% on the year, which was down only slightly from a +2.5% rise in January. The quarterly spending measure also remained in positive territory (+0.5%), indicating that growth momentum remains robust, while on a monthly basis expenditure fell only slightly (-1.0%).
Increased spending was noted in the majority of broad expenditure categories in February, with growth once again led by Hotels, Restaurants Bars (+13.6%) and Recreation Culture (which includes cinemas and theme parks) (+9.7%) categories. Food Drink (+4.8%), Household Goods (+3.6%) and Clothing Footwear (+3.3%) also saw robust increases in spending. Moreover, it was the fastest annual increase in Food Drink expenditure for 13 months. Looking at channel data, e-commerce continued to register robust spending growth in February (+6.3% year-onyear).
Meanwhile, face-to-face categories also saw higher expenditure in February (+2.8% year-on-year). Furthermore, the latest annual increase in face-to-face spending was the strongest seen since last May.
Kevin Jenkins, UK Ireland Managing Director at Visa Europe commented:
“February is always a key bounce-back month for retailers and 2016 has been no exception. Solid spending growth by consumers, especially on life’s luxuries, was responsible for a 2.2% annual growth figure. Face-to-face and online spending both grew, though the latter was stronger, suggesting retailers continue to forge ahead in this sphere.
“Hospitality and leisure sectors recorded stellar performance, as consumers treated loved ones to special dinners and romantic breaks on Valentine’s Day, while families enjoyed trips out during half-term. Hotels, restaurants and pubs owners saw spend reach the highest level for several years, up 13.6%. This was accompanied by a near 10% increase in spend on recreation and culture activities, the strongest performance for the sector for over a year-and-a-half
“Valentine’s Day falling on a Sunday this year also saw people spend more on food and drinks for a cosy night in, with the sector reporting the best performance since January 2015.”
Annabel Fiddes, Economist at Markit said:
“February data for the Visa Europe UK Consumer Spending Index pointed to a further robust rise in UK consumer spending, with expenditure rising +2.2% on the year, down only slightly from January’s increase of +2.5%. The latest rise in expenditure was underpinned by a variety of positive economic factors. Consumers continue to benefit from record low interest rates, subdued price trends and relatively low unemployment. Growth appeared broad-based, with consumers increasing their spend solidly on day trips and meals out, while Food Drink categories saw the fastest annual increase in spending for over a year.
“However, the outlook for 2016 is becoming increasingly uncertain, as the global economy shows further signs of a slowdown. This, in time, may feed through to lower consumer confidence and spending.”
What UK businesses are saying
Josh Beer, The Illustrious Pub Company, Cambridgeshire:
“For us, February is always the unknown month as the Christmas parties and catering contracts wind down, but the past month has been very good for us with revenue up 8.5% compared to last year. Valentine’s day led to a boost in trade as people took to their local to make a day of it and the fact that we didn’t see any snowfall also helped. At the moment our customers are treating themselves more and we’ve noticed that people are happy to spend more providing the quality meets their expectations.”
Imogen Hawthorne, Paisley Immy Cakes, Birmingham:
“We’ve seen a steady flow of business this February, both the number of orders and the amount being spent on the various cakes remains consistent with last year. We took advantage of having more free time after the Christmas period and ahead of wedding season by showcasing our cakes at a wedding fair, and we’re overwhelmed by the amount of interest it generated. The
fair itself was bustling compared to last year and we’re optimistic that this will convert into orders in the coming months.”
Wendy Dalton, Blush Boutique, Oldham:
“This month wasn’t as hectic for us. With that said we did see a rise in prom dress orders over the half-term period, as school goers maximised their free time and started planning ahead for their leaver’s balls. We’ve also got many fittings booked in for the coming months, and we expect next month will be busier with orders from people who received proposals over the Valentines
period and also the women that seized their opportunity and popped the question on the 29th.”