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6th June 2012Although inflation has recently shown signs of weakening, with earnings largely stagnant real wages continue to be squeezed and this is inevitably going to impact negatively on spending.
Paul Smith, senior economist at Markit
News that the UK is back in recession and deferred spending ahead of the Queen's Jubilee celebrations dashed hopes of a spring boost in consumer spending.
The latest figures from the Visa UK Expenditure Index, demonstrate household spending in the UK was flat during May, following a sharp fall in April.
Overall for the year spending continues to fall, but at the slowest rate in five months.
The Index, which is published on a monthly basis, uses card spending data and adjusts it for a variety of factors to create a like-for-like comparison of consumer spending.
Commenting on the findings of this month's Index, Dr Steve Perry, commercial director at Visa Europe, said the underlying trend for consuming spending is still weak, "signifying the struggle that consumers face as they react to recessionary pressures."
The sunshine is May was able to offer some respite on the high street as clothing and footwear spending rose by 2.3 per cent.
Looking to June's Index, Dr Perry noted that many people will be hoping the Diamond Jubilee celebrations last weekend "will be the catalyst that is needed to boost confidence" in consumer spending.
Paul Smith, senior economist at Markit, the financial information services company which compiles the data, agreed that the Jubilee celebrations may work to "lift spirits and increase consumer spending".
However, Smith noted that it is hard to get away from the fact that UK consumers continue to face "significant challenges to their budgets".
"Although inflation has recently shown signs of weakening, with earnings largely stagnant real wages continue to be squeezed and this is inevitably going to impact negatively on spending," he said.