Consumer spending dropped to the lowest level in five years during 2017, dragged down by lower than expected expenditure over the vital Christmas period.
According to the latest figures from Visa and IHS Markit, December saw spending fall by one per cent, trailing another disappointing drop of 0.9 per cent in November.
The meagre end-of-year spending has lead to a 0.3 per cent decline for the whole year, the first drop since 2012.
Although face-to-face spending declined at the softest rate in four months at 2.7 per cent, online spending growth also slowed to two per cent from 2.4 per cent in November, exposing the recent weaker rate of expansion in that channel.
The growing disparity between sectors was also visible, with food and drink being the only sector to show growth of 0.4 per cent.
Meanwhile, clothing and footwear dropped 2.4 per cent and household goods dropped 3.4 per cent.
“December’s CSI data rounds off a relatively weak year for consumer spending, with total expenditure declining for the seventh time in the past eight months,” IHS Markit principal economist Annabel Fiddes said.
“The sustained drop in expenditure comes at a time when household purchasing power is being continually eroded by rising living costs and relatively subdued growth in pay packets.
“Meanwhile, consumer confidence remains relatively muted amid uncertainties over the strength of the UK economy and the ongoing Brexit negotiations.
“Looking ahead, the impact of the fall in the value of the pound since the Brexit vote is expected to subside and weaken inflationary pressures, and subsequently the squeeze on households’ budgets.
“This could help to lead to a relative improvement in the spend figures, but given the overall picture it seems unlikely that expenditure will bounce back to the levels of growth seen in 2016 anytime soon.”