EDITORIAL USE ONLY File photo dated 26/12/2015 of shoppers at the Bullring shopping centre in Birmingham. Shopping centre owner Hammerson has agreed an all share takeover of rival Intu in a £3.4 billion deal that will create Britain's biggest property company. PRESS ASSOCIATION Photo. Issue date: Wednesday December 6, 2017. It will see the likes of Intu owned Lakeside and the Bullring in Birmingham, controlled by Hammerson, come under one roof, creating create a £21 billion shopping centre giant. See PA story CITY Hammerson. Photo credit should read: Jon Super/PA Wire
Shoppers at the Bullring in Birmingham © PA

Consumer spending has fallen for the third month in a row, according to analysis based on debit and credit card payments, as Britons curb their shopping habits in response to a prolonged squeeze on their pay.

The Visa Consumer Spending index, which is compiled by data company IHS Markit, fell 0.9 per cent in November from a year earlier. The index is based on total spending on Visa debit, credit and prepaid cards — which account for £1 in every £3 of all UK spending — adjusted for inflation and various other factors.

While the annual decline in November was milder than the 2.1 per cent drop in October, Visa said spending was “still on track for its worst annual performance in five years”.

Mark Antipof, Visa’s chief commercial officer, said he now anticipated the first fall in overall Christmas spending by consumers since 2012.

Consumers powered the economy in the aftermath of the Brexit vote, but this year retail sales growth has slowed as consumer confidence has weakened. This has coincided with a renewed squeeze on workers’ pay packets as inflation has overtaken stubbornly weak wage growth.

Visa’s data show that shoppers spent less on expensive items such as cars and Christmas trips in November, but more on “miscellaneous goods” like cosmetics and visits to beauty salons. Mr Antipof called this the “lipstick effect”: a trend where “people opt for smaller treats [while] at the same time tightening their belts when it comes to larger purchases”.

Black Friday — the sales event that has become a focus of the pre-Christmas shopping season — failed to boost overall spending in November though it did seem to result in more people shopping online and fewer on the high street. Online spending was 2.4 per cent higher than last year while “face-to-face” spending was 3.5 per cent lower.

Annabel Fiddes, principal economist at IHS Markit, said the figures "add to the relatively downbeat assessment of UK consumer spending, as households budgets continue to be squeezed by rising living costs and lacklustre wage growth. Unless the squeeze on households unwinds and consumer confidence strengthens, it seems unlikely that consumer spending trends will improve anytime soon”.

The latest official forecasts from the Office for Budget Responsibility, the fiscal watchdog, suggest pay will grow an average 0.6 per cent a year in real terms in the six years to 2022, much less than the 2 per cent or so that was typical before the financial crisis.

The darker outlook for consumer spending has contributed to new economic forecast downgrades from the British Chambers of Commerce. The business lobby group has cut its economic growth expectations from 1.6 to 1.5 per cent in 2017, from 1.2 to 1.1 per cent in 2018, and from 1.4 to 1.3 per cent in 2019.

“The UK economy is in a challenging period with growth likely to remain well below average for a prolonged period,” said Suren Thiru, head of economics at the BCC.

“Continued uncertainty over Brexit and the burden of upfront cost pressures facing businesses is likely to stifle business investment, while falling real wage growth is expected to continue to weigh on consumer spending.” 

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