UK consumer spending showed signs of resilience last month, as October saw the fastest rate of increase in six months, according to new research.
On an annual basis, spending rose +2.5% in October, up from +2.3% in September, contrasting with a relatively muted expenditure growth over the summer, revealed Visa’s latest UK Consumer Spending Index.
The report found that spending increased through both e-commerce and face to-face channels in October. The former continued to lead overall growth, rising by +4.3% year-on-year, while it was the first time that face-to-face expenditure had increased since July (+1.8%).
Kevin Jenkins, UK & Ireland managing director at Visa said: “Consumer spending growth rose to a six month high in October. Talk of potential price rises does not appear to have dented consumers’ confidence, with spending up 2.5% on the year, on a par with pre-referendum levels.
“The experience economy continued to fuel this growth. Hospitality and leisure were the best performing sectors once again, boosted perhaps by the half term break and Halloween, with a noticeable increase in spend on food and drink.”
Hotels, Restaurants & Bars saw the strongest annual rate of expenditure growth of all eight broad sectors (+9.0%). It was also the fastest rate of growth seen in this category since February. Stronger rates of expenditure growth were also reported in Recreation & Culture (+7.4%) and Food & Drink (+4.7%).
Clothing & Footwear meanwhile saw spending increase for the first time since July, and at the quickest pace since September 2015 (+4.7% on the year). The only sectors to see spending decline were Transport & Communication (-1.4%), Misc. Goods & Services (-2.0%) and Health & Education (-3.2%).
Mr. Jenkins added: “New season stock, combined with a chilly start to winter created the perfect conditions for the high street to rebound from last month’s flat line. As we get closer to the all-important Christmas trading season, it will be interesting to see whether the strong momentum in October continues into Black Friday and beyond.”
What are UK businesses saying?
Visa is tracking the sentiment of several small businesses across the UK on a monthly basis, asking about their views on the economy, business conditions and forecasts for the month ahead.
Josh Beer, The Illustrious Pub Company, Cambridgeshire said: “October tends to be a good month for us as people settle back into their routine following holidays and new winter menus are launched, and business in October saw a marginal pick-up of 0.4% compared with September. We look to Christmas parties and gatherings as key revenue drivers for the rest of the year. Although these haven’t been totally booked up yet, it feels as though people are increasingly leaving making bookings late. There do seem to be concerns about inflation and petrol price rises. Bearing this in mind we’re taking a cautious view as we look to the future.”
Quan Nguyen, Chi Cafe, London said: “We had a good month in October with sales significantly higher than in previous months. The change in the weather and the hot soup range we have may have helped draw more customers through the door. On the other hand, our stock costs have risen in the past few weeks which means we will be under increasing pressure to keep our prices low for our customers in the coming months.”
Imogen Hawthorne, Paisley Immy Cakes, Birmingham said: “While our sales in October were quite standard for this time of the year, there were two positive factors that we noticed this month. First, we saw an increase in orders during half term, mainly for children’s parties. Second, our customers were in the mood to spend as more were opting for our top of the range cakes for their special occasions. Looking forward, we’re slightly worried about rising inflation and how it will impact our costs and sales. “