Consumer spending dropped by 1 percent in December 2018, with the run-up to Christmas hitting the sector particularly hard, new data shows.

Visa’s UK Consumer Spending Index, compiled by IHS Markit, revealed that overall expenditure continued to decline at the end of last year - with December’s -1.0 percent year-on-year reduction the fastest seen since April, accelerating from a -0.7 percent decline in November.

Expenditure fell in eight months of 2018, and was largely driven by a disappointing performance by the struggling high street, with face-to-face (in-store) spending falling -1.6 percent on an annual basis in December. Growth in ecommerce spending rose 0.5 percent, up from November’s 0.4 percent.

‘A disappointing end to 2018’

Commenting on the results in a statement, Adolfo Laurenti, European principal economist at Visa, said: “The further decline in UK consumer spending in December 2018 is a disappointment, but not a surprise. Notwithstanding a backdrop of low unemployment and rising wages, households remained very cautious at the end of the year - as they were for most of 2018.

“An acceleration in spending at hotels, restaurants and bars (+7.6 percent year-on-year) suggests that some categories of discretionary spending are holding up better than the market as a whole. And the modest pickup in ecommerce point to the resilience of digital channels of distribution, a favorable long-term trend that recent woes have not derailed.”

Annabel Fiddes, principal economist at IHS Markit, added: “December’s CSI data show a disappointing end to 2018, with household spending failing to pick up in the run-up to Christmas. The sustained fall in expenditure throughout the fourth quarter of 2018 coincides with a marked drop in consumer confidence, as uncertainty around the UK’s impending exit from the EU continues to dampen sentiment.

“Alongside relatively weak UK PMI survey data, which signalled muted business activity in December, the spend figures add to evidence that the UK economy is likely to have slowed in the final quarter of 2018.”

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