British consumers turned more cautious about their spending in September after going on a summer spree, two surveys showed on Tuesday, suggesting the overall economy can no longer cope on them quite as much to soften the drag of Brexit.
Shops reported total spending edged up by an annual 0.7 percent last month, the slowest rise since October last year apart from a slump in April which was distorted by the timing of the Easter holiday, the British Retail Consortium said. A broader measure of consumer spending by Barclaycard (L:BARC) increased by the smallest amount in five months, rising by an annual 3.9 percent.
“We’ve seen spending return to a more modest level as consumers balance their budgets after a longer than usual summer of spend,” Esme Harwood, a Barclaycard director, said.
Household consumption accounts for about 60 percent of Britain’s economy. The Bank of England and other forecasters have been surprised by its strength since the Brexit vote in 2016, even as pay growth has lagged behind inflation.
The propensity of consumers to spend has helped to soften a slowdown in the overall economy.
But there have been signs that after a summer heatwave and the soccer World Cup, households have turned a bit more cautious. The BoE last week reported the weakest increase in borrowing by consumers in nearly three years.
Nearly half of the consumers surveyed by Barclaycard — 46 percent — were planning to spend less on Christmas this year than they did in 2017, she said.
The BRC data showed that on a like-for-like basis, which excludes the effect of changes in store space, retail sales fell 0.2 percent in September, the first non-Easter decline since October last year.
British consumers have lost some of their defiance in the face of Brexit uncertainty, according to the latest monthly retail sales report from the British Retail Consortium.
Like-for-like retail sales for the month were down 0.2 per cent on September 2017, a month in which “consumers were more defiant in the face of Brexit and shopping regardless” says Paul Martin, UK head of retail at KPMG.
Non-food sales disappointed, with a decline of 0.6 per cent in the three months ending in September, as “the historically reliable back-to-school push did not elevate apparel sales”, Mr Martin said.
However, online retail fared better, Mr Martin added, with clothing sales taking the lead.
Food and grocery sales grew by 3.4 per cent in the third quarter compared to the same period the previous year. Even taking into account inflation, sales value grew year-on-year in September — though only “modestly”, according to Jon Woolven of the IGD, the Institute of Grocery Distribution.
“Shopper confidence has followed a downward path”, Mr Woolven said. “Brexit related uncertainty probably plays a part in this, so retailers will be hoping for a clear resolution ahead of the Christmas shopping season.”