Visa Europe: UK Expenditure Index

9 March 2015
Visa Europe: UK Expenditure Index
Compiled by Markit on behalf of Visa Europe
Further growth in consumer spending in February, as
rising real incomes and low inflation take effect
Headline findings:



Consumer spending rises 1.2% on an annual basis in February
Strongest spending increases in Hotels, Restaurants & Bars; Food, Beverages & Tobacco; and Household Goods
High street spending remains a key driver of overall growth
The Visa Europe: UK Expenditure Index indicated a
further solid increase in consumer spending in February,
with expenditure increasing through all three monitored
channels. Sector data indicated that expenditure growth
was sustained in key sectors such as Food, Beverages
& Tobacco, Hotels, Restaurants & Bars and Household
Goods in February.
Household spending rose +1.2% year-on-year in
February, thereby extending the current sequence of
annual expenditure growth to five months. However,
spending fell marginally on the monthly measure
(-0.5%), following a strong January (+2.1%).
As has been the case throughout much of the past two
years, Hotels, Restaurants & Bars saw the strongest
increase in expenditure in February (+9.0% on the
year). Household Goods (+3.6%) and Food, Beverages
& Tobacco (+2.7%) also saw solid spending growth.
Meanwhile, both Recreation & Culture (+1.1%) and
Transport & Communication (+0.8%) saw increases in
expenditure for the first time in six and four months
respectively.
At -4.6%, household spending continued to decline in
Misc. Goods & Services (which includes hairdressing
and jewellery), while Clothing & Footwear retailers
noted reduced spending for the third successive month
(-3.4% on the year).
High Street spending rose solidly for the second
month running (+1.5% year-on-year), and continued
to outpace Online expenditure growth (+0.8% on an
annual basis).
Kevin Jenkins, UK & Ireland Managing Director Visa Europe said:
“Household spending may not have been quite as strong as January, but February was still another good month for
the consumer economy. With household incomes returning to pre-recession levels and low prices on food and fuel,
consumer confidence looks in decent shape.
“British consumers look to be spending more on the things they enjoy. Dining out was clearly popular again in February
as hotels, restaurants and bars saw a bumper month, while spend on recreation and culture bounced back for the first
time since August 2014.
“On the flip side, spending on clothing fell for a third month in a row in February.”
Paul Smith, Senior Economist at Markit said:
“Despite a slight monthly drop following a strong January, February’s Visa Europe: UK Expenditure Index signalled that
underlying year-on-year growth of consumer spending remains solid. With the exception of Clothing & Footwear, retailfacing sectors seemed to perform particularly well, especially household goods which enjoyed its best performance
for seven months.
“Overall, we expect consumer spending to make ongoing positive contributions to total UK economic activity, with the
data indicative of a 0.6% q/q rise in GDP over the first quarter as a whole.”
Visa Europe: UK Expenditure Index
Dec-14
Jan-15
Feb-15
Overall Spending Annual % Change (SA)
+1.2%
+1.4%
+1.2%
Overall Spending Monthly % Change (SA)
-2.6%
+2.1%
-0.5%
Face-to-Face Spending Annual % Change (NSA)
-0.2%
+1.4%
+1.5%
Online Spending Annual % Change (NSA)
-0.4%
-0.2%
+0.8%
Mail/Telephone Order Spending Annual % Change (NSA)
+4.6
+2.1
+3.1%
Visa Europe: UK Expenditure Index
Summary
Household spending continued to increase on an annual
basis in February, according to the latest Visa Europe: UK
Expenditure Index data. Expenditure was up by +1.2%
year-on-year, following a similar increase in January
(+1.4% on the year).
Your tex
Visa Europe: UK Expenditure Index
Annual % Change
3m/3m % Change
15
Total V E I E xpenditure, Y ear-on-Y ear, S A (LH S )
Total V E I E xpenditure, 3m /3m , S A (R H S )
10
However, following a strong month-on-month rise in
household expenditure in January (+2.1%), a slight
decline in consumer spending on a monthly basis was
registered in February (-0.5%). Expenditure also fell
marginally on the quarterly measure in February (-0.2%),
after a slight increase at the start of the year (+0.6%).
4
3
2
5
1
0
0
-1
-5
This is according to Visa Europe’s UK Expenditure Index,
which takes card spending data and adjusts it for a
variety of factors to create a like-for-like comparison of
consumer spending. This distinguishes the Index from
Visa’s corporate performance, and thereby provides a
robust indicator of consumer spending habits.
-2
-10
-3
-15
-4
2006
2007
2008
2009
2010
2011
2012
2013
2014
Online and Face-to-Face Spend
UK consumer spending increased across all three
monitored channels in February, with Mail/Telephone
Order categories noting the strongest rate of growth.
UK Expenditure Index: Online vs Face-to-Face*
Annual % Change
15
Online expenditure increased in February (+0.8% yearon-year), following a marginal reduction at the start of
the year (-0.2%). Furthermore, it was the first time that
Online spending had increased on an annual basis since
last September.
10
5
0
Meanwhile, Face-to-Face spending rose for the second
successive month in February, with the rate of expansion
little-changed from January (+1.5% on the year).
-5
-10
Mail/Telephone Order categories also saw a solid increase in
expenditure during February (+3.1%), thereby extending
its current sequence of growth to three months.
V E I E xpenditure by C hannel, O nline, Y ear-on-Y ear, N S A
V E I E xpenditure by C hannel, Face-to-Face, Y ear-on-Y ear, N S A
-15
2009
2010
2011
2012
2013
2014
Spending by Sector
Visa Europe’s UK Expenditure Index monitors eight broad
sectors. Summary data for annual growth rates in January
and February 2015, which are not adjusted for seasonality
and trading days, are provided in the table opposite.
Annual Growth Rates By Sector*
Latest data indicated that spending rose in five of the
eight broad categories in February. The strongest rate of
growth continued to be recorded by Hotels, Restaurants
& Bars. Household Goods and Food, Beverages & Tobacco
also saw solid expenditure growth in February, while
spending volumes rose slightly in Recreation & Culture
and Transport & Communication categories.
Jan ‘15
Feb ‘15
Food, Beverages & Tobacco
+4.9%
+2.7%
-3.8%
-3.4%
Household Goods
+1.8%
+3.6%
Health & Education
-0.7%
-2.6%
Transport & Communication
-1.8%
+0.8%
Recreation & Culture
-1.3%
+1.1%
Hotels, Restaurants & Bars
+9.7%
+9.0%
Misc. Goods & Services
-5.4%
-4.6%
Clothing & Footwear
At the other end of the table, Misc. Goods & Services
(which includes hairdressing and jewellery) reported
the sharpest reduction in expenditure, while Clothing
& Footwear and Health & Education also noted marked
reductions in spending.
Broad Sector
*data not adjusted for seasonality and trading days
Visa Europe: UK Expenditure Index
Your tex
Official Data Comparisons
UK Expenditure Index & Household Expenditure
Annual percentage changes in Visa Europe’s UK
Expenditure Index have an excellent relationship with
a number of official data series, in particular household
expenditure from the Office for National Statistics (ONS).
Annual % Change
Annual % Change
15
Total V E I E xpenditure, Y ear-on-Y ear, S A (LH S )
O N S U K H ousehold E xpenditure, Y ear-on-Y ear, S A (R H S )
10
8
7
6
5
Most recently, the Visa Europe: UK Expenditure Index
successfully tracked a further expansion of GDP in the
final quarter of 2014.
4
5
3
2
0
1
0
The Visa Europe: UK Expenditure Index data pointed to
a further improvement in underlying household spending
trends in February, with expenditure rising for the fifth
successive month on an annual basis in February and at a
solid rate. Meanwhile, following a strong January, a slight
decline in expenditure on the monthly measure was seen
in February, while spending on a quarterly basis also fell
marginally.
-1
-5
-2
-3
-10
-4
-5
-15
-6
2006
2007
2008
2009
2010
2011
2012
2013
2014
Your tex
The stronger underlying year-on-year expenditure trends
have been supported by a variety of factors across the
UK economy. Unemployment has plummeted to its lowest
level for more than six years, while the recent slump in
global oil prices has helped to dampen inflation to a record
low. Meanwhile, wage packets are starting to increase in
real terms after a sustained period of decline.
UK Expenditure Index & GDP
Annual % Change
Annual % Change
15
Total V E I E xpenditure, Y ear-on-Y ear, S A (LH S )
O N S U K G ross D om estic P roduct, Y ear-on-Y ear, S A (R H S )
10
12
10
8
6
5
With improving economic conditions and strong consumer
confidence, household spending should continue to
increase in the near-term, and will contribute to a further
expansion of GDP in the first quarter of 2015.
4
2
0
0
-2
-5
-4
The Visa UK Expenditure Index uses card transaction data
to provide a robust indicator of total consumer expenditure
across all payment methods and is used by a range of
stakeholders to gain insights into consumer spending,
including HM Treasury. It is based on spending on all Visa
debit, credit and prepaid cards which are used to make
an average of over 1.9 billion transactions every quarter
and account for £1 in £3 of all UK spending. Working with
Markit, these card spending data figures are adjusted
for a variety of factors such as card issuance, changing
consumer preferences to pay by card rather than cash
and inflation. These adjustments mean that these data
are distinct from Visa Europe’s business performance and
the Index reflects overall consumer spending, not just
that on cards.
-6
-10
-8
-15
-10
2006
2007
2008
2009
2010
2011
2012
2013
2014
UK Expenditure Index & Consumer Confidence
Net Balance
Annual % Change
15
10
Total V E I E xpenditure, Y ear-on-Y ear, S A (LH S )
D G E C FIN C onsum er C onfidence, Y ear-on-Y ear, S A (R H S )
10
0
5
-10
For further information, please contact:
0
Mark Hooper, Visa Europe
Tel: 020 7297 1356
Email: hooperm@visa.com
-20
-5
-30
-10
David Chambers, H+K Strategies
Tel: 020 7413 3047
Email: david.chambers@hkstrategies.com
-15
-40
2006
2007
2008
2009
2010
2011
2012
2013
2014
Sources for Charts: Visa Europe, ONS, European Commission
NSA: Non-Seasonally Adjusted, SA: Seasonally Adjusted
Visa Europe: UK Expenditure Index
Notes and Further Information
The headline ‘Visa Europe: UK Expenditure Index’ is based on data for all
Visa debit, credit and prepaid cards with a number of adjustments made to
ensure an accurate indication of consumer spending trends is provided.
Visa Europe works at the forefront of technology to create the services and
infrastructure which enable millions of European consumers, businesses and
governments to make electronic payments. Its members are responsible for
issuing cards, signing up retailers and deciding cardholder and retailer fees.
First, the data are cleaned to remove any spending on items that are
not ordinarily be classified as consumer expenditure (such as spending
on savings products or taxes). Moreover, refunds and cashback are also
accounted for at this stage. Second, the data are deflated by changes in the
number of active Visa cards in order to account for the expansion of Visa’s
card operations, particularly on the debit side. Thirdly, an adjustment is made
to offset changing consumer preferences for card usage. This is based on
an assessment of the trends in cash withdrawals and point-of-sale (POS)
transactions on Visa cards. Fourthly, to account for inflation, the data are
deflated by changes in the consumer price index to provide an indicator of
real changes in household spending. Finally, the headline data are seasonally
and trading day adjusted.
Visa Europe operates a high volume, low cost business model that provides
services to its members. Its surplus is reinvested into the business and used
to improve capital and reserves.
More than £1 in every £3 spent in the UK is on a Visa card, with debit
cards accounting for over 80% of this. In the year to September 2013, total
expenditure on UK Visa cards increased 9.2% to £445 billion, while online
spending increased 18% to £110 billion.
The ‘Visa Europe: UK Expenditure Index’ spending by product categories
consist of the following standard Classification of Individual Consumption
According to Purpose (COICOP) groups:
Product Category
COICOP Group
Food, Beverage & Tobacco
Clothing & Footwear
Housing & Household Goods
Health & Education
Transport & Communication
Recreation & Culture
Hotels & Restaurants
Miscellaneous Goods & Services
1, 2
3
4,5
6,10
7,8
9
11
12
Visa Europe is a payments technology business
owned and operated by member banks and other
payment service providers from 37 countries across
Europe.
Since 2004, Visa Europe has been independent of Visa Inc. and incorporated
in the UK, with an exclusive, irrevocable and perpetual licence in Europe.
Both companies work in partnership to enable global Visa payments. As a
dedicated European payment system Visa Europe is able to respond quickly
to the specific market needs of European banks and their customers cardholders and retailers - and to meet the European Commission’s objective
to create a true internal market for payments.
For more information, please visit www.visaeurope.com
Markit Economics is a specialist compiler of
business surveys and economic indices, including
TM
TM
the Purchasing Managers’ Index (PMI ) series,
which is now available for 32 countries and key regions including the
TM
Eurozone. The PMI
surveys have become the most closely watched
business surveys in the world, favoured by central banks, financial
markets and business decision makers for their ability to provide up-todate, accurate and often unique monthly indicators of economic trends.
e-mail: economics@markit.com