Consumer spending fell 1.7 per cent year-on-year in December with the high street hit particularly hard, according to new research from Visa Europe.
The UK Expenditure Index, compiled by Markit for Visa Europe, revealed that UK household spending for December declined by 1.7 per cent year-on-year and 0.9 per cent month-on-month.
High street spending recorded a greater decline, down two per cent year-on-year, while online spending remained broadly flat with a drop of only 0.4 per cent.
Commenting on the findings, Visa Europe’s Commercial Director, Dr Steve Perry, said: “The final quarter of 2012 was the first unaffected by temporary factors such as the Queen’s Jubilee or the Olympics since Q1.
“With a decline in total consumer spending of 0.9 per cent recorded in the final quarter, the latest data are therefore suggestive of a decline in household spending, and for that matter Gross Domestic Product.”
Spending was particularly low in the household goods sector, with a 9.2 per cent year-on-year decline, and it fell by 13.3 per cent in the health and education category.
Hotels and restaurants did particularly well, with spending rising by 6.7 per cent, while clothing & footwear saw a small decline of 0.9 per cent.
Although figures for the month as a whole were low, spending in the week before Christmas was up 12.5 per cent week-on-week, indicating a last minute present-buying rush.
Online retailers also benefited from this sudden influx of shoppers, as online spending increased by 12.5 per cent week-on-week in the final week before Christmas.
Chris Williamson, Chief Economist at Markit, said that the figures serve as a warning to retailers, commenting: “Despite a surge in spending as shoppers sought online bargains in the week before Christmas, consumer spending remained disappointingly weak in December, down 1.7 per cent on last year.
“With inflation continuing to outstrip pay growth, and worries persisting about job security and the economic outlook, consumer spending looks likely to remain under pressure for some time.”