UK consumer spending grows at slowest rate in 3 years: Visa

In March alone, spending dropped 0.7% compared with the previous month, after being flat in February.

Governor of the Bank of England Mark Carney poses with a new polymer £5 note, at Whitecross Street Market, to promote the launch of the new bank note, in London, on September 13, 2016. The Bank of England will initially issue 440 million of the new polymer £5 notes ($6.7, 5.9 euros) and the old note will cease to be legal tender in May 2017. “We expect polymer notes to last at least two-and-a-half times longer than the current generation of fivers and therefore reduce future costs of production,” Carney said. STEFAN WERMUTH / POOL / AFP

LONDON – British consumer spending increased at the slowest annual pace in more than three years in the first three months of 2017, in a further sign that one of the economy’s main engines is losing steam as Brexit preparations begin, a survey showed on Monday.

Payment card company Visa (V.N) said real-terms spending increased 0.9% year-on-year in the three months to March, the weakest calendar-quarter performance since late 2013 and down from 2.7% in the last quarter of 2016.

In March alone, spending dropped 0.7% compared with the previous month, after being flat in February.

The survey adds to a growing mass of indicators showing that rising inflation, caused in part by the pound’s post-Brexit vote tumble, is crimping consumer spending, just as Prime Minister Theresa May begins Britain’s EU divorce talks.

“Our data suggests that consumer spending is beginning to slow from the strong levels seen in late 2016, as rising prices increasingly squeeze household purchasing power,” said Kevin Jenkins, UK and Ireland managing director at Visa.

Bank of England Governor Mark Carney, speaking at Thomson Reuters’ London office on Friday, said he would keep a close eye on whether consumer demand weakens in line with the central bank’s expectations.

Last week pension provider Scottish Friendly and the Social Market Foundation think tank said 46% of households plan to cut back on spending. More than half of these households blamed the rising cost of living.

The Office for National Statistics releases inflation data for March on Tuesday. Economists polled by Reuters expect consumer prices rose at a 2.3% annual pace, unchanged from February’s rate.

Visa’s monthly figures are based on spending on its credit and debit cards, which it says account for about a third of consumer spending in Britain.

The figures are adjusted to strip out payments such as taxes that do not count as consumer spending, and to take account of the growing proportion of purchases made by card rather than with cash.