UK household spending in August saw the strongest growth since September 2011 with a month on month growth of 0.7% reports the card issuer Visa.

This is in contrast to the latest from the British Retail Consortium, which reported that like for like sales fell in August by 0.4%.

However, Visa did say in its UK Expenditure Index for August that overall spending was down 0.8% on a quarterly basis and also down 2.2% on a year on year basis.

With Visa cards accounting for about £1 in every £3 spent in the UK the company claims that the adjusted data provides a robust indicator of overall spending.

As can be seen from the Visa figures below the overall spending figures are showing a gradual improvement over time.

But, apart from August’s overall spending compared to July we are still in negative territory.

Aug 2012

Jul 2012

Jun 2012

Overall Spending Monthly % Change (seasonally adjusted)

0.7%

-0.7%

0.3%

Overall Spending 3m/3m % Change (seasonally adjusted)

-0.8%

-1.5%

-2.0%

Overall Spending Annual % Change (seasonally adjusted)

-2.2%

-4.9%

-4.0%

Face to Face Spending Annual % Change (not seasonally adjusted)

-1.7%

-3.7%

-2.5%

Online Spending Annual % Change (not seasonally adjusted)

-9.3%

-4.0%

-5.7%

Mail/Telephone Order Annual % Change (not seasonally adjusted)

-3.4%

-6.8%

-8.2%

The annual figures for face to face and mail/telephone ordering also appear to be improving but online spending is moving in the wrong direction.

On a broad sector basis miscellaneous goods and services saw the worst drop in spending with August being down a huge 17.2% on July following on July’s large drop of 11.9%. Visa said that this was mainly down to less spending on financial services products such as insurance.

Other fallers were food, beverages and tobacco (-2.2%), household goods (-2.4%) and recreation and culture (-3.5%).

Sectors that saw a rise in spending were clothing and footwear (0.7%), health and education (2.3%) and hotels & restaurants (2.8%).

Spending on transport and communication held steady (0.0%).

Dr Steve Perry, Commercial Director at Visa Europe said:

“Not since September 2011 have we seen such strong monthly growth in spending. August’s figures point to a slightly improved picture for Q3 compared against Q2 and hopefully the new found Olympic optimism will translate into consumer spending in the coming months. Spending is down compared against the same period last year but retailers in particular have cause to be hopeful based on today’s numbers as headline monthly growth of 0.7% underplays the strength of retail sales which were undermined by weaker services spending.”

Paul Smith, Senior Economist at Markit, the company that compiled the data, said:

“The latest UK Expenditure Index re-affirmed separate data from business surveys of a relative bounce in the performance of the UK economy during August, with month-on-month growth in consumer spending of 0.7% a welcome uplift following gloomier figures in previous months. Fingers will be crossed that August provides a springboard for a positive end to the year, especially as the crucial Christmas shopping season will soon be upon us.

“That said, the prevailing economic environment remains difficult and household finances still remain under pressure given the squeeze on real incomes and an ongoing high level of unemployment.”

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