British shoppers have been reining in their spending as uncertainty around the economy hits household budgets.
Visa’s Consumer Spending Index for May show the slowest increase in consumer spending since February 2014, up only 0.8% for the year.
The index, which last month showed a surge in online spending, reveals a 5.2% drop in the transportation and communications sector and a 0.8% fall in face-to-face expenditure.
Clothing and footwear retailers bucked the trend, though, with spending going up by 4.2% year-on-year.
Kevin Jenkins, UK & Ireland managing director at Visa Europe, said: “Following a strong run in the first four months of the year, it seems that consumer spending growth has finally caught up with the uncertainty around the UK economy.
“Shoppers have clearly reined back their spending overall, and in particular, on big ticket items.
“In contrast, clothing bounced back strongly in May, posting its first rise in three months, as warmer weather prompted shoppers to stock up on their summer wardrobes.
“The two May Bank Holidays and the half-term break provided other bright spots, with spending on going away, dining out and entertainment continuing to perform well.
“Spending on the latter has softened from the record level seen in previous months, however, suggesting consumers are spending their disposable income more carefully.”
Annabel Fiddes, economist at Markit, said: “Looking at the broad spending categories, growth remained subdued across key areas of spend such as food and drink, and leisure categories.
“The latest data add to evidence that growing uncertainty around the economic outlook has contributed to a more cautious spending environment, and suggests that growth could remain muted until uncertainty fades and conditions both at home and abroad show signs of improvement.”
Visa has spoken to a number of business owners, who suggest that events such as the European Championships and the EU referendum will have an impact on consumer spending over the next month.
Josh Beer of The Illustrious Pub Company in Cambridgeshire, said it is becoming increasingly difficult to compete with high street food chains.
“To address this we’re installing TVs to allow sports fans to cheer England on from their local,” he said.
“We hope this will provide a boost to our sales in June, especially if the England team does well at Euro 2016.”
Tony Bailey, of Top Notch Hair & Beauty in Manchester, said: “Uncertainty surrounding the referendum has led consumers in the area to be more calculated with their spending, and this has caused our revenue to go down by 8% this month.
“The general feeling we’re getting from our clients is that they’re concerned about the unknown, and how this might affect their budgets.
“These worries are reflected in the fact that we’re 2.3% down on visits this month, as people become more cautious.”