Valentine's Day and half-term break help lift consumer spending in February

Consumer spending picked up in February as Valentine's Day and the half-term school break encouraged people out to restaurants, bars, hotels and cinemas, a report has found.

Annual growth in spending picked up to 1.5% in February after easing to a five-month low of 0.4% in January, according to Visa UK's Consumer Spending Index.

Growth was led by spending on recreation and culture, which includes cinema trips and meals out. This type of spending was up by 3.3% year-on-year.

Spending on hotels, restaurants and bars also saw an annual increase of 1.2%, while spending on miscellaneous goods and services, which includes beauty products and jewellery, was up by 2% annually.

But spending on clothing and footwear, food and drink, household goods and transport and communication was down year-on-year. 

Despite the pick-up in spending overall, the 1.5% annual increase was softer than an average increase of 2% seen across 2016, Visa said, suggesting households are becoming more cautious about splashing out. 

Kevin Jenkins, UK and Ireland managing director at Visa, said growth in the "experience sector" continues to be a significant driver of consumer spending.

He said: "Valentine's Day and the half-term break gave consumers more reasons to dine out and treat their loved ones to short getaways around the UK.

"At the same time, the level of growth in the leisure and hospitality sectors was softer than we have seen in the past year, showing signs that consumers are becoming more cautious with their discretionary spending.

"And for clothing retailers, February was yet another challenging month."

The biggest annual fall in spending in February was in the clothing and footwear category, which recorded a 4.5% decline, while food and drink spending fell by 1%, spending on household goods declined by 3.1% and transport and communication spending fell by 4%.

Recent Bank of England consumer credit figures have prompted concerns from charities that some people may be over-stretching their borrowing, leaving them at risk of sinking into a debt spiral. Rises in living costs are expected to get bigger this year, putting more pressure on households.

Visa's index uses spending on Visa cards as a base and adjusts the figures to reflect overall consumer spending.

It found spending online was up by 3.2% year-on-year in February, while for the third time in four months, face-to-face spending in the high street declined, with a 3% fall last month.

Annabel Fiddes, an economist at IHS Markit, which helps Visa to compile the index, said: "The outlook for expenditure growth over the remainder of 2017 remains relatively lacklustre, with further increases in living costs expected to lead to a sustained squeeze on households.

"Additionally, Brexit-related nerves and concerns over the direction of the UK economy are feeding through to relatively low levels of consumer confidence, while expectations that unemployment could start to edge up this year could also weigh on consumer spending."

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