Consumer spending drops amidst Brexit fears

Consumer spending saw the slowest increase in more than two years in May as mounting uncertainty towards the EU referendum and a slowing global economy takes a toll on consumer confidence, according to a new report from Visa.

Spending increased by just 0.8 percent annually in May, down from a 2.6 percent increase in April, according to Visa UK's Consumer Spending Index, marking the slowest rate since February 2014.

Clothing and footwear retailers saw the first year-on-year increase in consumer spending for three months, with a 4.2 percent increase, which the report said was likely helped by warmer weather boosting demand for summer clothing. While recreation and culture continued to see strong growth with a 4 percent increase, however, this was the weakest seen for 32 months.

Growth in e-commerce also slowed to a 2.3 percent year increase in May, down from April’s 8.5 percent annual increase, while face-to-face expenditure fell slightly on an annual basis in May to -0.8 percent, which contrasted with a fractional increase in the April of 0.2 percent.

Visa Europe, UK and Ireland managing director, Kevin Jenkins, said: "Following a strong run in the first four months of the year, it seems that consumer spending growth has finally caught up with the uncertainty around the UK economy.

"Shoppers have clearly reined back their spending overall, and in particular, on big ticket items. In contrast, clothing retailers bounced back strongly in May, posting its first rise in three months, as warmer weather prompted shoppers to stock up on their summer wardrobes.”

Markit economist, Annabel Fiddes, added: "The latest data add to evidence that growing uncertainty around the economic outlook has contributed to a more cautious spending environment, and suggests that growth could remain muted until uncertainty fades and conditions both at home and abroad show signs of improvement.”