LONDON Feb 13 British households kept a tighter
grip on their credit cards last month as spending grew at one of
the slowest annual rates of the past three years, data from Visa
showed on Monday, adding to signs that consumer spending is
starting to lose momentum.
Robust consumer spending helped Britain's economy to outpace
its peers last year, even after June's Brexit vote, but most
economists think rising inflation as a result of sterling's
hefty slide will eat into growth in 2017.
Consumer spending, adjusted for inflation, rose just 0.4
percent on the year in January, down sharply from 2.5 percent in
December and - aside from August, shortly after the Brexit vote
- the weakest annual growth rate in over three years, Visa said.
"Following a bumper Christmas season, there were signs that
consumers were starting to rein in their spending at the start
of the New Year," Visa managing director Kevin Jenkins said.
The British Retail Consortium reported last week that
spending in the November-January festive period grew by the
smallest amount since the depths of the financial crisis, while
the Confederation of British Industry said its January retail
gauge fell by the most since records began in 1983.
On the month, however, Visa said consumer spending was up by
0.5 percent after a 2.5 percent dip in December - broadly
matching the picture which economists expect from narrower
official retail sales data due on Friday.
Most economists think inflation neared the BoE's 2 percent
target last month, after undershooting it for three years which
helped support households' disposable income during a period of
lacklustre wage growth.
With sterling down around 15 percent against the U.S.
dollar, the BoE expects inflation to reach 2.7 percent by the
end of 2017 and for disposable incomes to stagnate.
"As a result, households' purchasing power will be squeezed
further which, combined with relatively muted consumer
confidence, may lead expenditure to settle on a slower growth
trajectory in 2017," said Annabel Fiddes, an economist at IHS
Markit, which compiled the data for Visa.
The figures are based on spending on Visa's credit and debit
cards with adjustments to take account of the growing proportion
of purchases made electronically rather than with cash. Unlike
Britain's official retail sales data, they also include spending
on entertainment, transport and eating out.
(Reporting by David Milliken; Editing by William Schomberg)