Photographer: Chris Ratcliffe/Bloomberg

U.K. Consumer Spending Weakens With Sharp Slowdown in April

  • ‘Relatively modest’ expenditure seen in coming months: Visa
  • Business confidence rises, though consumer-facing firms lag

U.K. consumer-spending growth slowed in April and is forecast to remain weak in the coming months, according to a report from Visa.

Its index showed spending rose an annual 0.5 percent in April, down from 1 percent in March and marking one of the slowest rates of growth in the past three years. Weaker household demand is also taking a toll on retailers. A separate report from the Institute for Chartered Accountants in England and Wales showed while there was a jump in business confidence this quarter, retailing was the laggard among nine sectors covered.

“The trend of relatively modest expenditure growth is likely to extend in to the coming months, as consumers are squeezed by both rising living costs and relatively lackluster wage growth,” said Annabel Fiddes, an economist at IHS Markit, which compiles the consumer index.

Inflation was at 2.3 percent last month and is forecast to keep accelerating through this year, outpacing wage increases and leaving workers facing a drop in real incomes. The Bank of England may raise its forecast for consumer-price growth this week, which could indicate an even bigger squeeze on households.

The overall business sentiment gauge by the ICAEW jumped the highest in almost a year this quarter. Yet despite firms being more confident, the report showed they are still reluctant to make long-term commitments.

While Brexit is dominating the agenda in the buildup to the U.K. election on June 8, the institute said all parties must spell out how they will “address the problem of business investment head-on.”

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