Shoppers key to avoiding triple-dip recession

A RISE in consumer spending indicates the UK has avoided entering a triple-dip recession during the opening months of the year, according to figures published today.

Data compiled by research group Markit will reveal a third successive monthly rise in consumer spending as shoppers who were unable to reach the high street amid heavy snow turned to the internet to satisfy their renewed appetite for spending.

Growth of 1.3 per cent in March is the strongest since September and up from 0.9 per cent in February.

Chris Williamson, chief economist at Markit, said that – apart from the Olympics-related spending spree last autumn – the first quarter of 2013 saw the largest increase in consumer spending since the depths of the recession in 2009.

“Adverse weather either failed to deter shoppers from venturing out in March or led to a shift to the internet, pushing sales higher for the third successive month,” Williamson said.

“The improvements tally with recent survey evidence indicating that households are starting to feel brighter again, linked in many cases to being busier at work and taking home more pay.”

Markit found that expenditure trends across all sectors remained varied, with the solid gain being fuelled by a boost from online shopping.

But the survey also revealed the first increase in face-to-face spending since September 2012.

After relatively-disappointing figures in February, face-to-face sales grew 0.6 per cent in March while online sales increased 1.9 per cent, signalling that – despite the cold weather – consumers found ways to shop. Spending also grew on an annual basis, up 1.2 per cent compared to March 2012.

Steve Perry, commercial director at Visa Europe, which commissioned the research, said: “Although spring may not have sprung just yet, there are signs that the longed-for thaw in consumer spending may be upon us.

“With all the key measures in positive territory, these figures represent a strong end to the period and should make a significant contribution to overall gross domestic product [GDP] levels in the first quarter.”

Figures from Barclaycard also show online spending surged last month. The group – which, as a provider of debit and credit card systems to businesses, monitors about half of all UK retail spending – said payments to online shops were 12 per cent higher than a year before.

But accountancy firm BDO’s monthly retail sales figures show the second-coldest March on record dented sales of spring fashions. Its figures, also released today, show overall like-for-like sales in March dipped 0.9 per cent year-on-year.

BDO said Mothers’ Day gifts boosted sales in the non-fashion category, which grew 7.3 per cent. However, the wintry weather left shoppers in no mood to buy the latest spring and summer clothing lines hitting the shelves of fashion retailers, and sales slumped 3.4 per cent.

With weather forecasters warning the cold snap will continue until at least the middle of April, the effects of the poor weather are expected to knock on well into this month. Retailers fear shoppers will now hold out for summer lines, forcing them to clear spring stock by discounting.

Consumer spending has a strong relationship with GDP – the economic decline in the fourth quarter of 2012 was predicted by consumer data. Official figures published later this month will reveal whether Britain suffered a second-consecutive quarter of output decline, plunging it into a “triple-dip” recession.

Recent industrial surveys show the dominant services sector has been expanding but manufacturing and construction remain in the doldrums, placing the overall outcome on a knife edge.