Third month of consumer spending decline marks biggest slump period since 2013

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Consumer spending fell for the third month in a row in July, marking the biggest period of decline seen since 2013, a report has found.

Spending fell by 0.8% annually in July, following annual declines also recorded in May and June, according to Visa's UK Consumer Spending Index.

It said the figures are further evidence that households are feeling the squeeze from rising prices and stagnant wage growth.

The fall in spending in July marked the first time since early 2013 that spending has declined annually for this length of time.

Transport and communication recorded the biggest annual decline in spending in July, down by 6.1%. This was followed by clothing and footwear, where spending declined by 5.2% year-on-year. 

Food and drink spending was down by 0.5% annually, while spending on household goods fell by 4%. 

Household goods spending has either fallen or stagnated each month since last December, the index said.

Bucking the declines, spending on hotels, restaurants and bars jumped by 6% annually in July, while spending on recreation and culture also increased by 1.3%.

The report suggested the figures may have been boosted by a surge in "staycations" as falls in sterling have pushed up the cost of trips overseas.

Overall spending online was up by 3.6% annually in July, while face-to-face spending on the high street fell by 3.7%.

The index, compiled by Markit, uses spending on Visa cards as a base and adjusts the figures to reflect all UK consumer spending, not just that on cards.

Kevin Jenkins, UK and Ireland managing director at Visa, said: "Consumer spend fell for the third month in a row in July, the first time overall spending had fallen for three consecutive months since February 2013.

"The figure provides further evidence that rising prices and stagnant wage growth are squeezing consumers' pockets.

"The drop in spending was felt across a broader range of retail sectors last month, with clothing, household goods, food and transport among the worst hit.

"There were still some bright spots in July, with hotels, restaurants and bars reporting a 6% increase. The sector is likely to have benefited from an early surge in summer staycations, as the weak pound made holidaying at home more attractive."

Annabel Fiddes, principal economist at IHS Markit, said: "Alongside the renewed squeeze on household budgets, uncertainties linger over the direction of the economy and the outcome of the ongoing Brexit negotiations, which is weighing down consumer confidence.

"All this makes it seem unlikely that consumer spending will recover in the current challenging conditions, and adds to expectations that the Bank of England will not hike rates anytime soon."