Rising inflation and wage stagnation caused a slowdown in UK household spending growth to 0.5% year-on-year in April, according to the Visa Consumer Spending Index.
Consumer spending growth was previously estimated at 1% in March. The growth at the start of Q2 2017 was the weakest since January, and was lower than the average annual first-quarter growth rate of 0.9%.
The hotels, restaurants and bars sector reported the highest increase of 9.2% in April compared to 4.2% in March. The food and drink sector registered a spending increase of 5.9%, the highest in three years.
Kevin Jenkins, UK and Ireland managing director at Visa, said: “Consumer spending slowed down further in April, as consumers tightened their belts in the face of rising prices running up against stalling wage growth. Annual spending growth fell back to 0.5%, from an already subdued rate of 1% in March.
“While overall figures suggest that clouds are gathering over British consumers, there were still some bright spots. Easter and the extended half-term break may have contributed towards a strong uplift of over 9% in the hospitality sector.
“Meanwhile, Easter eggs and hot cross buns helped food and drink sales rise at their fastest rate in three years, up nearly 6%. This seems to support the claim of some food and drink retailers that Easter is becoming ‘the new Christmas’.”
The Visa Consumer Spending Index further reported that the health and education and transport and communication sectors registered the steepest declines of 9.5% and 9.2% respectively.
“The trend of a relatively modest expenditure growth is likely to extend in the coming months, as consumers are squeezed by both rising living costs and relatively lacklustre wage growth,” said IHS Markit Economist Annabel Fiddes.