There was a marginal reduction in household spending between November and December of 2012, at a drop of 0.9 per cent, according to Visa Europe’s UK Expenditure Index.
Year-on-year spending was at 1.7 per cent lower as of December, compared to the previous year, with high street trade reported as the principal source of weakness in the final month of 2012.
Declines were also seen elsewhere, particularly in expenditure on household goods.
However, the latest data from Visa found that annual growth in miscellaneous goods and services and hotels and restaurants.
Dr Steve Perry, Commercial Director at Visa Europe said: “Consumer spending rallied towards the end of December with week-on-week growth of 12 per cent in the week before Christmas as consumers made the most of the final shopping weekend. Despite the closeness to Christmas, online spending as a proportion of overall spend stood at 12.5 per cent during this final week, up considerably on 2011 (11.2 per cent) indicating consumers’ increasing preference for online purchases.
“Comparing December to the same month in 2011, spending was -1.7 per cent lower with high street spending particularly challenged, registering a decline of -2 per cent on the year. Against this backdrop of low consumer confidence, online spend again proved more resilient with spending broadly flat year-on-year and therefore representing a greater share of overall spend.
“The final quarter (Q4) of 2012 was the first unaffected by temporary factors such as the Queen’s Jubilee or the Olympics since Q1. With a decline in total consumer spending of -0.9 per cent recorded in the final quarter, the latest data are therefore suggestive of a decline in household spending, and for that matter Gross Domestic Product.”
Chris Williamson, Chief Economist at Markit said: “Despite a surge in spending as shoppers sought online bargains in the week before Christmas, consumer spending remained disappointingly weak in December, down -1.7 per cent on last year. Having risen 1.8 per cent in the third quarter, due to a large extent to the Olympics, spending fell by -0.9 per cent in the final quarter as shoppers reined in their expenditure towards the end of the year.
“With consumers playing an important role in fuelling the 0.9 per cent GDP increase in the third quarter, the drop in fourth quarter spending raises the likelihood that the economy may have contracted again.
“With inflation continuing to outstrip pay growth, and worries persisting about job security and the economic outlook, consumer spending looks likely to remain under pressure for some time.”
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