Consumer spending in the UK didn’t bounce back in April, despite hopes that the consumer economy would pick up again after the heavy snows in February and March that kept people indoors and not spending money.
The new data comes from a couple of surveys that were published today. The British Retail Consortium (BRC) recorded a drop of 3.1% in retail spending year-on-year in April – the biggest market contraction since the BRC started gathering data in 1995. Data from Barclaycard, which includes a broader range of consumer purchases, saw a slight increase in spending – but it was the weakest increase in the last five months.
Last week, the Office for National Statistics announced that the UK’s GDP – the gross domestic product; a measure of our nation’s overall productivity – grew by just 0.1% in the first quarter of 2018, the lowest level of growth in five years.
According to the BRC the market will likely remain “extremely challenging” for retailers. Barclaycard’s managing director Paul Lockstone said, “… there’s no indication that [consumers] are looking to loosen the purse strings quite yet. Instead, the UK seems to be caught in a holding pattern, with people still budgeting carefully.”
This downturn in the economy will almost certainly impact whether the Bank of England raises the base interest rate or not. An increase in base rate usually triggers an increase in mortgage rates and thus larger monthly repayments – which in turn depresses consumer spending. The Bank of England had been signalling that the base rate was likely to rise on May 10 – probably from 0.5% to 0.75%. Now, following April’s weak economic figures, that increase will likely be postponed – potentially until August.
While the British economy is on shaky ground overall, there are a few positive indicators that are worth keeping an eye on. Travel spending increased by 10.3% – the biggest increase since 2015 – and eating out in pubs and restaurants was up 7.6% and 7.2% respectively.