Consumer spending drops to four-year low

Consumer spending has dropped to its lowest since the third quarter of 2013.

According to Visa’s Consumer Spending Index, June spending rounded off the worst quarter for almost four years.

The index, which reflects overall consumer spending, reported household expenditure declined on an annual basis for the second month running (-0.3%), while overall spending in Q2 fell by 0.3% year-on-year – the lowest since Q3 2013.

Face-to-face spend decreased 2.4% year-on-year, and while growth in the eCommerce sector grew 2.9%, it did so at a slower rate.

“June data provides further evidence that an increase in the cost of living, coupled with slowing wage growth, are beginning to squeeze household disposable income,” said Kevin Jenkins, UK & Ireland MD at Visa.

“It’s clear that inflation is beginning to affect shopping habits too, with consumers diverting their spending to essentials. Spend on food and drink grew by nearly 2%, while household goods suffered from a substantial drop (-3.4%) as consumers cut back on big ticket furniture and homewares. The experience sector – which the Index has shown consistently outperforming in recent years – has started to feel the impact too. Spend on recreation and culture dropped (-1.2%) for the first time in nearly four years."