Headline findings:
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Household expenditure rises +1.1% year-on-year in March and +1.3% month-on-month
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Strong spending increases on recreation, culture and at hotels, restaurants and bars
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But spend on clothing and footwear drops for fourth month in a row
Household spending rose in five of the eight broad expenditure categories in March, led once again by Hotels, Restaurants Bars (+7.1% on the year). Meanwhile, Recreation Culture (+2.0%) and Household Goods retailers (+1.4%) also saw solid increases in expenditure.
On the other hand, consumer spending declined for the fourth straight month in Clothing Footwear categories (-4.8%). Transport Communication (-1.5%) and Health Education (-2.1%) also noted reduced expenditure at the end of the first quarter.
Channel data suggested that expenditure growth was led by Online retailers in March, where the rate of increase was the strongest for 11 months (+4.1% year-on-year). Meanwhile, spending on the High Street fell for the first time in three months, albeit marginally (-0.2% on the year).
Kevin Jenkins, UK Ireland Managing Director Visa Europe said: “We’ve seen a gradual improvement in consumer confidence in recent months, driving higher spending on household goods, recreation and eating out. A dry March, coupled with low inflation and real wage increases has continued that trend. People across Britain are increasingly dining out and going out, though spending remains prudent rather than excessive. Elsewhere in the economy, clothing retailers remain under pressure after a fourth straight month of spending decline. Summer lines, the May bank holidays and good weather ahead will be looked on with hope as well as expectation.”
Annabel Fiddes, Economist at Markit said: “The latest set of Visa Europe: UK Expenditure Index data points to a further steady increase in consumer spending, with growth recorded across all three expenditure measures in March. Consumers spent more on going out to Hotels, Restaurants Bars, while Recreation Culture categories also saw solid growth. However, Clothing Footwear retailers
recorded reduced spending for the sixth time in the past seven months. “Strong growth in total consumer spending adds to evidence that the UK economy is on track for an expansion of GDP of around 0.7% in Q1 according to our estimates. Furthermore, a tightening labour market and weaker inflationary pressures have contributed to a renewed increase in real wages, suggesting that expenditure trends will remain positive as we head into Q2.”
What UK businesses are saying:
Starting this month, Visa is tracking the sentiment of several small businesses across the UK on a monthly basis, asking about their views on the economy, business conditions and forecasts for the month ahead.
Tony Bailey, Top Notch Hair Beauty, Manchester: “We had a very good month in March – total number of visits increased by 9.4% and turnover by 4.5% over the same period last year. Since February, our business seems to get better by the day with customers more willing to spend on looking good. We expect April to be even better as spring weather kicks in.”
Pauline Cusack, Glen Guest House, Birmingham: “We had an excellent month in March. Occupancy rate was 90%, up from 75% in March 2014. We serve mainly corporate guests on business trips to companies in the local area. These companies are doing very well and we are definitely benefiting from that.”
Quan Nguyen, Chi Café, London: “Our revenue was up 3.6% in March, continuing the upward trends starting from late last year. We’ve seen more new customers coming through our door looking for lunches that are healthy, freshly made to order and served fast. Tastes are changing too as people are seeing the world more and are looking for alternatives to sandwiches, which really helps our business.”