Britons slashed their spending on new clothes and shied away from the high street in January as they juggled Christmas debts and rising living costs.
Spending increased by a meagre 0.4% in January, according to Visa’s consumer spending index. The year-on-year growth rate was a five-month low, which followed December’s robust 2.5% increase. The spending tracker highlighted a grim period for clothing retailers, with the amount Britons spent on their wardrobes dropping 3.8% – the biggest decline since April 2012.
“Clothing and household goods retailers experienced a particularly difficult January,” said Visa UK and Ireland managing director Kevin Jenkins. “The traditional start of year sales did little to lift clothing spend, which saw the biggest drop in nearly five years. The high street as a whole suffered a disappointing month too, with spend falling at the quickest rate in four years.”
It came as the BRC-Springboard footfall tracker showed shopper numbers dropped 1.3% last month. “The drop in footfall across the UK’s bricks and mortar destinations in January may be a sign of tougher things to come in 2017,” said Springboard analyst Diane Wehrle. “Of significance is that footfall is correlating closely with retail sales, with all sales results published so far showing a poorer performance in January [2017] than in January 2016.”
Last month official figures showed Britain’s retailers suffering a surprise end-of-year slump in sales, which analysts suggested was a sign that rising prices since the Brexit vote are starting to hurt people’s spending power. Sales volumes dropped 1.9% in December although for the final three months of the year sales were still ahead 1.2% on the previous quarter.
The Brexit vote’s blow to the pound has made imports more expensive and some of that impact is now being passed on to consumers, with inflation hitting its highest level for more than two years in December.
The Visa data also highlights the growing importance of the “experience economy” as consumers spend more of their disposable income on doing things rather than buying them. The monthly snapshot showed spending on hotels, restaurants and bars up nearly 6% on the previous January while spending on recreation and culture was up 3.1%.
After increasing solidly over the final quarter of 2016, the spending barometer points to a “much softer pace” of expenditure growth at the start of 2017, according to Annabel Fiddes, an economist at IHS Markit.
“A key threat to expenditure in the coming months is building inflationary pressures in the economy, partly due to the effects of a weaker sterling exchange rate feeding through to consumers,” explained Fiddes. “As a result, households’ purchasing power will be squeezed further which, combined with relatively muted consumer confidence, may lead expenditure to settle on a slower growth trajectory in 2017.”