Shoppers snub Christmas discounts as figures show retail spending fall

HEAVY discounting by retailers over the Christmas period failed to entice shoppers into splashing out as consumer spending fell last month, according to research released today.

The figures from Visa show spending dropped in December on both a monthly and a yearly basis.

Outlay on food, beverages and tobacco saw a sharp year-on-year fall of 5.3 per cent, while spending on transport and communication also saw an annual decrease of 5.8 per cent.

Overall spending fell by 1.1 per cent month-on-month in December and by 0.8 per cent when compared with the same period in 2010.

Those behind the survey said the monthly drop reflected recent volatility as consumers become cautious against an uncertain economic backdrop.

A prominent Scottish retail trade body said its own research, due out next week, was expected to reflect a “tough” time for shops north of the Border over the Christmas period, but suggested the UK-wide picture was “slightly more positive” than the Visa study suggests.

The report, compiled by financial information services firm Markit, showed mail and telephone order spending saw a 3 per cent year-on-year decline, while face-to-face spending decreased by 1.4 per cent and online spending saw a more modest decline of 0.4 per cent.

This is the first time in two-and-a-half years that a year-on-year decline has been recorded for all three of these methods.

The Visa UK Expenditure Index uses spending on its cards as a base, but the figures reflect overall consumer spending, not just that on Visa cards.

Chris Williamson, chief economist at Markit, said: “With the consumer accounting for approximately two-thirds of all expenditure in the economy, the downturn clearly adds to worries that the UK may be sliding back into recession.”

Despite several sectors seeing a decline over the year, hotels and restaurants saw a 12 per cent growth in spending, while the clothing and footwear sector recorded a 6.7 per cent rise.

Dr Steve Perry, commercial director at Visa Europe, said: “Against a backdrop of challenging economic circumstances, consumers’ uncertainty translated into subdued Christmas spending, despite heavy discounting both on the high street and online. It is clear that consumers have become increasingly savvy and cautious about where they choose to spend.”

Richard Dodd, head of media at the Scottish Retail Consortium, said figures due out tomorrow from its sister organisation, the British Retail Consortium, were expected to paint a more optimistic picture.

“What we’re expecting is something slightly more positive than the Visa report,” he said. “In December across all retailing, both in-store and online, and regardless of how people paid, I think what we’re going to see is a modest increase in value terms of spending compared with a year earlier, and an increase on November, which was a really poor retail month.

“The big question will be whether that spending growth in pure money terms actually beats inflation and amounts to real terms growth. I think probably it won’t and we’ll be looking at slightly less having been spent than a year earlier, but despite the tough conditions, we’ll find people did come out and spend for Christmas in the end, even though they left it late.”