LONDON (Reuters) - British consumers tightened their belts in February, giving the weakest start to the year since 2012, figures from payments company Visa showed on Monday, raising the prospects that the broader economy will slow in the first quarter of 2018.
Visa said inflation-adjusted consumer spending in February was 1.1 percent lower than a year earlier, after a 1.2 percent decline in January.
“Rising living costs, lacklustre wage growth and relatively subdued consumer confidence are all likely playing a part in the ongoing reduction in household spending,” said Annabel Fiddes, an economist at IHS Markit, which compiled the data for Visa.
British inflation hit its highest in more than five years in November, pushed up by a surge in import costs after the pound tumbled following June 2016’s Brexit vote.
During the course of last year, Britain moved from being the fastest-growing major advanced economy to the slowest as consumer spending slowed and businesses held back on investment while the terms of Britain’s departure from the European Union in March 2019 remain unclear.
On Friday, the National Institute for Economic and Social Research (NIESR) estimated that quarterly growth had weakened to 0.3 percent from 0.4 percent at the end of 2017, and that recent unusually snowy weather might deal a further blow to growth.
“As we look ahead into March, consumer spending is at risk of posting one of the worst Q1 results on record,” Visa’s chief commercial officer, Mark Antipof, said.
The British Retail Consortium said on Monday that the number of people on the high street was down by 0.5 percent in the first part of February, before the bad weather hit.
Domestic consumer spending makes up the largest part of British economic demand, but businesses - especially manufacturers - have been buoyed by a booming world economy.
IHS Markit, in a separate survey also released on Monday, said business confidence continued to recover from a low struck after June 2017’s inconclusive election result but remained low by the standards of the past five years.
Manufacturers are the most upbeat about production growth since 2015, but sentiment was relatively subdued among services companies.
Reporting by David Milliken