Consumer spending has fallen for the first time in almost four years, with business confidence also on the slide.
According to data from Visa, spending fell 0.8% in May, the first reduction recorded since September 2013. Half of the eight of its spending categories saw declines, with food and drink recording a 0.6% decline.
Meanwhile, a poll of 700 Institute of Directors members has found a “dramatic drop” in confidence following the hung parliament.
According to IoD director-general Stephen Martin the current political instability could have dire consequences for the UK economy.
He told the BBC: “The needs of business and discussion of the economy were largely absent from the [general election] campaign, but this crash in confidence shows how urgently that must change in the new government.”
Visa UK managing director Kevin Jenkins said the fall in spending in May was driven by rising prices and stalling wage growth.
He added: “Retailers of non-essential goods were among the worst hit, with clothing and household goods seeing sharp declines in sales. The experience sectors continued to record some growth, though at much softer rates, suggesting consumers were reining in their discretionary spending.
“Bricks-and-mortar retailers had a particularly challenging month, with sales dropping at the quickest level in over five years, at a time when warmer weather and the May bank holidays would usually drive shoppers on to the high street.”
The Visa figures were in contrast to a 0.3% rise in April, with high street spending declining at the fastest pace sine early 2012.
Commending on the data Annabel Fiddes, economist at IHS Markit said: “The outlook for consumer spending continues to look relatively bleak, with households facing faster increases in living costs and muted wage growth. The squeeze on household finances is likely to get worse as the Bank of England forecasts faster increases in consumer prices in the coming months. Combined with relatively low levels of consumer confidence, uncertainty around the outcome of Brexit and a slowdown in UK economic growth, it’s likely we will continue to see weaker expenditure trends at least in the near-term.”