Consumer spending was down in 2012 compared to the previous year, despite an Olympics boost and a last-minute rush in online shopping in December.
New data from the Visa Europe UK Expenditure Index reveals that year-on-year spending was 1.7% lower in December, with high street spending being principal source of weakness in final month of 2012.
Visa Europe’s UK Expenditure Index takes card spending data and adjusts it for a variety of factors to create a like-for-like comparison of consumer spending, provising a robust indicator of consumer spending habits.
Dr Steve Perry, Commercial Director at Visa Europe, said:
“Consumer spending rallied towards the end of December with week-on-week growth of 12% 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% during this final week, up considerably on 2011 (11.2%) indicating consumers’ increasing preference for online purchases.
“Comparing December to the same month in 2011, spending was -1.7% lower with high street spending particularly challenged, registering a decline of -2% 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 Visa Europe data indicates continued annual growth in the Goods and Services and Hotels and Restaurants sectors, but declines elsewhere, particularly Household Goods. Modest reductions were recorded elsewhere, with Food, Beverages and Tobacco registering a decline of -2.2% year-on-year, and Clothing and Footwear slightly down at -0.9%.
“The final quarter (Q4) of 2012 was the first unaffected by temporary factors such as the Queen’s Jubilee or the Olympics since Q1," Dr Perrry said.
"With a decline in total consumer spending of -0.9% recorded in the final quarter, the latest data are therefore suggestive of a decline in household spending, and for that matter Gross Domestic Product.”
Consumer spending rose by 1.8% in the third quarter of 2012, due to a large extent to the Olympics.
Chris Williamson, Chief Economist at Markit said:
"With consumers playing an important role in fueling the 0.9% 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.”