July sunshine sees consumer spending grow

Posted On: 
10th August 2015

Consumer spending grew by 1.9% in the year to July, according to the latest Visa Europe UK Expenditure Index.

The growth was driven by spending on hotels, restaurants and bars, which increased by 8.6% compared to July 2014.

There were also strong figures for spending on recreation and culture, which rose by 5.6%, and miscellaneous goods and services, which grew by 5.1% on 12 months earlier.

The overall annual growth figures for May and June were 2.5% and 1.4% respectively.  

Spending dropped in three of the eight sectors measured by the index: clothing and footwear (down 0.6% over the year), transport and communication (down by 0.8%), and health and education (down by 2.5%).

Kevin Jenkins, the UK & Ireland managing director at Visa Europe, identified the potential for a rise in interest rates as one of the factors that could affect consumer spending in months to come.

“Consumer spending rose strongly in July, following a record performance in the second quarter of the year,” he said.  

“With the holiday season in full swing, Brits spending on leisure activities for the family, dinners and nights out were behind the rise. The high street, following a muted performance in June, has seen a bounce back too, perhaps in part due to July’s warm weather.

“Looking forward, it will be interesting to see how consumers react to the possibility of interest rate increases looming on the horizon. The overall outlook for consumer spending remains positive rather than excessive, with low inflation and a pick-up in wages continuing to put money into the pocket of consumers.”

Annabel Fiddes, an economist at Markit, said the figures showed spending “continued to increase at a solid clip at the start of the third quarter”.

“Spending volumes were likely to have been boosted by improving economic fundamentals, with unemployment remaining at a historically low level and subdued inflationary pressures helping to boost real wages,” she said.

“Sector data highlight divergent trends, however, with spending rising markedly on days out and at hotels and restaurants, while expenditure rose only slightly in food & drink categories and continued to fall at clothing & footwear retailers.”