UK consumer spending rises at weakest pace in three years

Consumer spending in the UK grew at the slowest pace in more than three years in the first three months of 2017, a fresh survey has suggested.

Spending climbed 0.9% compared to a year earlier in the January to March period, considerably slower than the 2.7% growth recorded in the preceding three months, a report from Visa and IHS Markit said.

That is the weakest pace of growth recorded in the consumer spending index since the fourth quarter of 2013.

Visa attributed the slowdown in spending to rising inflation squeezing consumers' pockets.

In March alone, household expenditure was up by 1% year-on-year following a 1.3% increase in February.

"Relatively modest increases in expenditure through the opening quarter adds to the picture of a slowing UK economy, as highlighted by recent business surveys, while rising inflationary pressures have eaten away at consumers' spending power," said Annabel Fiddes, economist at IHS Markit.

"The strong increases in expenditure we saw through most of 2016 are unlikely to be replicated this year."

Fiddes added that there was little chance of consumer spending picking up, with inflation forecast to rise further this year and households and businesses facing a prolonged period of uncertainty due to Brexit.

E-commerce spending rose 8.2% in March, the fastest rate of growth recorded since November, but spending on the high street declined 1.3%.

The leisure sector saw the biggest increase in consumer expenditure during the month, up 7.2% from a year ago.

Kevin Jenkins, UK & Ireland managing director at Visa, said: "Our data suggests that consumer spending is beginning to slow from the strong levels seen in late 2016, as rising prices increasingly squeeze household purchasing power.

"The index confirms an ongoing trend of consumers prioritising experiences, as spend on food, clothing and household goods continued to trail behind."

The UK's official inflation rate stood at 2.3% in February, up from 1.8% in January. It is expected to climb further in the coming months as the weaker pound pushes up import prices.