'Subdued' growth in consumer spending

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New data released over the weekend has shown growth in UK consumer spending in September after a volatile summer of customer expenditure.

The UK Expenditure Index September 2011, published by Visa Europe in partnership with Markit Economics, shows a 2.5 per cent increase month-on-month following a variable summer of consumer spending.

However, year-on-year spending in September was down by 0.9 per cent.

The Index, previously released quarterly but now in its first monthly edition, is based on spending on all Visa debit, credit and prepaid cards and serves as an indicator of consumer spending trends.

It is estimated that Visa payment cards are used for over 1.4 billion transactions per quarter, accounting for £1 in £4 of spending in the UK.

Data is adjusted to take into account differing factors, such as card issuance, preferences and inflation, ensuring that the Index provides a thorough and accurate indication of the spending habits of consumers.

The increase in spending varied across different retail methods and sectors, with online spending up by 8.9 per cent year-on-year, but so called ‘'face-to-face' expenditure down by 2.1 per cent.

The Index also showed that spending in five sectors – health and education, hotels and restaurants, household goods, miscellaneous goods and services, and recreation and culture – had increased over the last year.

Declines were recorded in the food, beverages and tobacco and transport and communication sectors.

Commenting on the results, Dr Steve Perry, Visa Europe's commercial director, highlighted the increase in online shopping.

Perry said: "Despite a rise in consumer spending of 2.5 per cent in September, spending throughout the summer months has been variable and therefore unpredictable.

"Periods of consumer caution were followed by short bursts of spending as September recorded an improvement over August."

He continued: "Against this inclement background we have seen online shopping increase at pace, up 8.9 per cent year-on-year in September.

"Elsewhere at the sector level, certain categories such as hotels and restaurants continue to see spending growth, indicating selective discretionary spending."

And Chris Williamson, chief economist at Markit, argued that whilst there were hopes that the economy had rebounded in the three months to September, the rate of spending growth remained "subdued".

Williamson said: "The rate of growth of spending remained very subdued as households fought against multiple headwinds of rising prices, falling real incomes, job security worries and higher utility bills – all of which are factors likely to continue to restrain growth in the final quarter of the year."

The Visa Europe UK Expenditure Index September 2011 can be viewed here.