Consumer spending is heating up in the UK, posting the strongest quarter for consumer spending in five years. Spending rose +1.4% on an annual basis in June, rounding off the strongest quarter for household spending since Q2 2010. Underlying growth momentum remained strong looking forward.
At the sector level, Hotels, Restaurants and Bars continued to record a marked increase in expenditure (+6.9% on the year), while Recreation & Culture categories registered the sharpest rise in spending volumes since the series began six years ago (+5.8%). Strong growth was also seen in Household Goods, where the rate of expansion reached an 11-month high (+4.0), and Misc. Goods & Services (which includes hairdressing and jewelry) (+2.5%).
Meanwhile, Clothing & Footwear retailers saw a further decline in expenditure, albeit only slight (-0.9%), and Food & Drink categories recorded the second decline in spending in the past three months (-1.6%).
Online expenditure was a key driver of overall growth in June, and saw the sharpest increase in spending for 18 months (+6.6%), while Face-to-Face spending declined fractionally on the year (-0.2%).
Household expenditure in the UK continued to increase in June, albeit at a slower rate than seen in May. The latest Visa Europe: UK Expenditure Index signaled a + 1.4% year-on-year increase in spending volumes, down -10 from May’s recent peak of +2.5%. Expenditure growth on the quarterly measure also moderated slightly in June -15 (+0.9%, down from + 2.1% in May). Nonetheless, the 2006 data point to a further strong expansion of GDP in the
second quarter of 2015.
The sustained upturn in consumer spending has been UK Expenditure Index & GDP supported by improved underlying economic fundamentals in the UK. Consumer confidence remains historically strong while unemployment has dropped to and stayed at a seven-year low. Meanwhile, low inflation has helped wage growth reach a four-year high in recent months, while consumers and businesses also continue to benefit from record-low interest rates.
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