Six-month high in expenditure growth led by hospitality

14 November 2016 by Katherine Price

Consumer spending growth hit a six-month high in October led by the hospitality industry, according to the latest UK Consumer Spending Index from Visa.

Hotels, restaurants and bars saw the strongest annual rate of expenditure growth of 9% and the fastest rate of growth in the category since February. Consumer spending overall rose 2.5% from last October and was up 2.3% on September, the strongest rate of increase in six months, signalling robust growth since the muted expenditure growth over the summer around the Referendum vote.

Spending increased through both e-commerce and face-to-face channels in October. The former continued to lead overall growth, rising by 4.3% year-on-year, while it was the first time that face-to-face expenditure had increased since July (1.8%).

Kevin Jenkins, UK & Ireland managing director at Visa said: "Talk of potential price rises does not appear to have dented consumers' confidence, with spending up 2.5% on the year, on a par with pre-referendum levels. Hospitality and leisure were the best performing sectors once again, boosted perhaps by the half term break and Halloween. As we get closer to the all-important Christmas trading season, it will be interesting to see whether the strong momentum in October continues into Black Friday and beyond."

Annabel Fiddes, economist at IHS Markit added: "While the data paints a very encouraging picture of household spending, clouds continue to gather on the horizon as uncertainties around Brexit continue to dampen confidence and growth forecasts for the year ahead. Furthermore, rising expectations of greater inflationary pressures could lead to a tighter squeeze on households' purchasing power in the coming months."

Josh Beer of the Illustrious Pub Company in Cambridgeshire said: "October tends to be a good month for us as people settle back into their routine following holidays and new winter menus are launched, and business in October saw a marginal pickup of 0.4% compared with September. We look to Christmas parties and gatherings as key revenue drivers for the rest of the year. Although these haven't been totally booked up yet, it feels as though people are increasingly leaving making bookings late."

Quan Nguyen of Chi Café in London added: "We had a good month in October with sales significantly higher than in previous months. The change in the weather and the hot soup range we have may have helped draw more customers through the door. On the other hand, our stock costs have risen in the past few weeks which means we will be under increasing pressure to keep our prices low for our customers in the coming months."

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