According to new research by Visa, household spending fell by 1.2 percent in January, compared to a year ago. This is the first time there has been such a decline since 2013

Mark Antipof, Chief Commercial Officer at Visa, commented “Consumer spending entered the New Year on a downbeat note, falling for the eighth time in the past nine months, as Britons continued to cut back on spending. Clothing, furniture and household goods bore the brunt of consumers’ caution yet again, while spending on the British high street in general fell sharply as the traditional January sales failed to bring shoppers out in numbers this year.”

“The transport and communications sector was another victim of the spending squeeze, posting the sharpest decline of all spending categories. Given the widely reported slump in car sales in recent months, this was perhaps to be expected.

“It wasn’t all doom and gloom in January though. Britons tackled the January blues with evenings out and early holiday bookings, giving a boost to hotels, restaurants and bars. Spending on jewellery, beauty products and trips to hair salons recorded strong growth too, as consumers continued to prefer small treats over big tickets items.”

Commenting on the findings Annabel Fiddes, Principal Economist at IHS Markit, said: “Latest Visa UK CSI data signalled a disappointing start to the year, with consumer spending falling for the fifth month in a row on an annual basis. This suggests the weak expenditure trends in 2017 have carried through into 2018, as households continue to face rising living costs and lacklustre wage growth. Subdued spending trends coincide with a slowing of the overall UK economy during 2017, while the PMI surveys for January point to a further softening of growth momentum at the start of the year. Lingering uncertainties around the outcome of the ongoing Brexit negotiations are also weighing on consumer confidence, which has stayed well below the levels seen prior to the 2016 Brexit vote.

“However, labour market conditions remain tight, with employment at a record-high, which is expected to place greater upward pressure on earnings growth going forward. Combined with forecasts of cooling inflationary pressures over the coming months, these factors could lead to a relative improvement in expenditure trends as the squeeze on pay-packets unwinds, although overall trends are likely to remain largely subdued in the current economic environment.”