Despite England’s early exit from the World Cup the recent recovery of UK consumer spending was maintained during June, with year-on-year growth recorded for a ninth successive month and sustained increases in spending seen in key retail sectors such as food, drink, clothing and footwear.
John Thurso MP, a member of the Treasury Committee has reacted to the figures:
“This data confirms the continuing trend of a strengthening economy, which when taken with other indicators helps to underpin the consensus that strong growth is returning.
The likelihood of tightening monetary policy has also increased. Like many I am looking for the signs that show rising investment and productivity to confirm that the recovery is transferring from consumers to industry and bedding in.”
Latest data from the
Visa Europe’sUK Expenditure Index indicated that consumer spending was up +0.6% compared to a year ago.
That was down from a revised 1.0% in the previous month, although the slowdown represented some base effects – June 2013 had seen an increase in expenditure of 2.0%, which at the time was the fastest growth since October 2010. Compared to May, spending volumes were up 0.4% in June 2014.
The Index takes card spending data and adjusts it for a variety of factors to create a like-for-like comparison of consumer spending.
This latest data suggests that UK economic conditions are continuing to improve and raise expectations of a further increase in household expenditure in the second half of the year.
Natasha Toothill, Director of Retail at Visa Europe said:
"Consumer spending rose again in June, rounding off the fastest growing quarter since mid-2010 when the UK was emerging from the recession.
"Spend at pubs and bars and restaurants enjoyed particularly strong growth, up 9.3%, thanks to a combination of the World Cup and warm weather. Football fans increased spend on sports clothing and food & drink too, as they set themselves up to enjoy the games."
Visa Europe's UK Expenditure Index successfully tracked a further expansion of GDP in Q1 of 2014.
The latest data for June suggests that the UK economy is on track for another expansion of GDP in Q2 2014, with household expenditure rising for the ninth successive month on an annual basis in June.
Although the pace of increase eased further from April’s recent peak, spending is in the longest period of growth for four years. Expenditure also rose on the quarterly and monthly spending measures, indicating a further improvement in underlying expenditure trends.
The Visa Europe: UK Expenditure Index data remains consistent with a number of key economic indicators, including the expansion of GDP in Q1.
Unemployment has fallen to its lowest for five years, interest rates remain historically low and inflationary pressures are at their weakest for four-and-a-half-years. The latter added to hopes of real wage growth in upcoming months following a sustained period of falling or stagnant pay. Furthermore, consumer confidence weakened only slightly from May’s record high.
Paul Smith, Senior Economist at Markit, said:
"As one of the earliest demand-side indicators available for the UK economy, June’s Visa Europe: UK Expenditure Index dovetails nicely with other data we have to signal the ongoing expansion of the UK economy in the second quarter of the year.
"Although growth was a little slower in June, for Q2 as a whole, annual expansion was the best since mid-2010 when the UK was emerging from the deepest economic downturn since the Great Depression.
"With the high street showing continuing signs of underlying improvement, the latest numbers further add to views that monetary policy tightening by the BoE is now firmly on the horizon."