Consumer spending slowed over the Christmasperiod, according to figures that suggest Britons shunned the high street in favour of online shopping and nights out.
Spending fell back 2.3% in December from a strong November when Black Friday deals appeared to boost sales, figures from Visa show. That left consumer spending up 2.6% on the year, a slowdown from November’s growth of 3.1%.
Visa said the figures still capped off a strong finish to the year, and that taken together the final three months of 2016 marked the best quarterly performance for two years. That follows signs that households have largely shrugged off June’s Brexit vote and continued to spend.
A breakdown of the Visa figures underscores the recent trend for people to spend on activities rather than goods. Spending rose year-on-year on hotels, restaurants, bars, recreation and culture. It fell for clothing, footwear and household goods.
The figures chime with others showing footfall in shops down after Christmas. Visa’s data shows that online spending rose 5.5% in December, while face-to-face spending was up only 0.7% on the year. That followed a 1.7% fall in face-to-face spending in November.
“Online retailers enjoyed strong sales over the whole Christmas period, while bricks and mortar retailers saw an improvement after a disappointing dip in November, as consumers made a last minute dash for gifts on the high street,” said Kevin Jenkins, Visa’s managing director for the UK and Ireland.
“Growth was once again led by the experience sector, with consumers going to Christmas markets, travelling to visit loved ones or venturing to various parts of the country to celebrate.”
Diane Wehrle at the retail analysts Springboard, which tracks shopper numbers, said the number of people visiting British high streets and shopping centres was down slightly over December as a whole, with more significant drops on both of the traditional post-Christmas sales days of Boxing Day and New Year’s Day compared with last year, partly as a result of bad weather on 1 January.
“Our retail pound is being spread thinner. People are choosing to go out for a meal rather than buy a sweater,” she said. “People are buying more online and when they do go out there’s more focus on leisure spend. They might combine click and collect with a coffee or a meal or a visit to the cinema. It’s a more rounded experience.”
The consultancy IHS Markit, which compiles Visa’s spending report, joined others in warning of a tougher outlook ahead for retailers and other consumer-facing businesses as prices start to tick higher because the weak pound is making imports more expensive.
Annabel Fiddes, an IHS Markit economist, said: “The UK economy remains in a strong overall position to support expenditure growth into 2017. However, rising inflationary pressures could squeeze spending power, and, along with Brexit-related uncertainty, this could soften the overall growth trajectory of household spending.”
There are also worries that the strong run for consumer spending has been driven in part by people taking on more debt. The latest figures from the Bank of England show that unsecured consumer credit, which includes credit cards, car loans and second mortgages, grew at its fastest rate in more than 11 years.
New analysis from the TUC found that household debt rose sharply over 2016, with unsecured debt – that other than mortgages – reaching new highs.
The TUC said weak wage growth had left more families reliant on borrowing to support their living standards, and that unsecured debt per household rose to £12,887 in the third quarter of 2016, a £1,117 increase on a year earlier.
Total unsecured debt rose to £349bn in the third quarter of 2016, a record high and well above the £290bn peak before the 2008 financial crisis, it said.
“These increases in household debt are a warning that families are struggling to get by on their pay alone,” the TUC general secretary, Frances O’Grady, said.
“Employment may have risen, but wages are still worth less today than nine years ago. The government is relying on debt-fuelled consumer spending to support the economy, with investment and trade in the doldrums since the financial crisis.”
She said the government could help to protect living standards with decent pay rises for public sector workers, continued rises in the minimum wage to keep pace with inflation and by ensuring that spending on projects such as rail and road improvements targets communities where decent jobs are in short supply.
