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Financial News: UK Consumer Spending Growth Biggest In 3-1/2 Years:

UK Consumer Spending Growth Biggest In 3-1/2 Years: Visa

08/19/2020 - 06:23:00 (RTTNews)

(RTTNews) - UK consumer spending recovered in July for the first time since the coronavirus pandemic and at the fastest pace since late 2016, as more sectors of the economy reopened amid relaxation of the lockdown restrictions, survey data from the digital payment solutions provider Visa and IHS Markit showed on Wednesday.

Total expenditure grew 2.4 percent year-on-year in July, following a 6.5 percent decline in June, Visa's UK Consumer Spending Index survey showed.

The latest growth was the first since February and the quickest since December 2016.

Spending grew 8.5 percent on a month-on-month basis and rose by 5.5 percent from the previous quarter.

The growth was largely driven by a record 16.2 percent year-on-year growth in eCommerce expenditure.

Meanwhile, face-to-face spend dropped 6.9 percent, the weakest rate in the current five-month sequence of declines.

Household goods, and food and groceries segments remained the leaders in July with 27.9 percent and 20.9 percent growth, respectively. Spending on clothing and footwear rose 3.6 percent, the first gain since September 2018 and the biggest since October 2016.

"While July spending represents movement towards economic recovery, we remain cautious in our outlook," Adolfo Laurenti, European principal economist at Visa, said.

"June unemployment rose sharply and the situation looks unlikely to have improved in July."

Though there have been some improvements in cross-border tourism, the ability to travel remains uncertain as the number of COVID cases rise in parts of Europe, the economist added.

Annabel Fiddes, economics associate director at IHS Markit, expects public-facing sectors such as hotels and restaurants to continue to face acute challenges due to social distancing and other Covid-19 containment measures.

At the same time, the winding down of the government's furlough scheme is likely to push up unemployment and, combined with weaker pay trends, could hinder any future rises in household consumption, Fiddes said.

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