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UK shoppers continue to tighten purse strings, Visa says
[LONDON] British consumers continued to rein in their spending in April, suggesting retailers saw no immediate comeback after a weather-blighted first quarter.
Spending dropped 2 per cent from a year earlier, matching the decline in March when the Beast from the East snowstorm hit sales, Visa and IHS Markit said in a report Monday. Spending in stores, as opposed to online, declined by 5.4 per cent, the quickest pace for six years.
“The high street remained a key source of weakness amid recent reports of struggling retailers and store closures,” said Annabel Fiddes, principal economist at IHS Markit. “Economic growth has slowed, and the recent revival in wage growth has so far failed to translate into improved expenditure trends.”
The health of household spending, the engine of the British economy, will be crucial in determining how quickly the economy bounces back from the opening months of the year, when growth came to a near standstill. Inflation is easing but real incomes are still barely rising, offering scant respite for squeezed companies from B&Q owner Kingfisher Plc to department store Debenhams Plc.
The signal so far are mixed. The British Retail Consortium said sales fell at a record pace in April and minutes of the latest Bank of England policy meeting noted that retail insolvencies had affected more employees so far this year than during the whole of 2017. The National Institute for Economic and Social Research meanwhile said growth failed to pick up any momentum in the three months through April.
Stores may get a boost this month after an unusual spell of sunny weather. Next Plc raised its full-year profit forecast last week after soaring temperatures spurred shoppers to splash out of shorts and swimsuits.
“Retailers will be pinning their hopes on further improvements in household finances and warmer weather leading to a more upbeat few months heading into summer,” said Mark Antipof, chief commercial officer at Visa.