In bad news for retailers ahead of Christmas trading updates this week Visa UK’s latest data, for 2017, showed the first annual decline in consumer spending in five years.
In December, spending declined by 1%, worsening from a 0.9% drop in November as spending on the high street continued to fall.
Face-to-face spending suffered a 2.7% decrease compared to the prior year.
ONLINE GROWTH SLOWS
Online spending fared better but slowed from 2.4% growth in November to 2% in December.
Rising living costs from a weaker pound and subdued wage growth are to blame as consumers tightened their belts to make ends meet.
Among the biggest hit in December was transport and communications with spending down 4.4%. Household goods also declined by 3.4% over the same period, while clothing and footwear took a 2.4% hit.
It's not all doom and gloom as consumers are choosing to splash the cash on staycations instead of overseas trips and physical items says Visa.
IHS Markit is optimistic the impact of the weaker pound will subside and alleviate inflationary pressures. Unfortunately, the analysis specialist concedes expenditure is unlikely to bounce back to 2016 levels anytime soon.
Davy Research analyst David McNamara says UK households will remain under strain this year, citing a weak labour market and rising borrowing rates.
