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Spending by UK shoppers is set to slump in the run-up to Christmas as new research from Visa suggests consumer activity will be hit by weak wage growth and higher prices.
Visa and IHS Markit has predicted that spending in November and December will fall by 0.1% year-on-year – a marked downturn from the growth of 2.8% seen in the same period of 2016.
The decline will be led by a 2.1% slump in high street spending over the Christmas period, which is the biggest fall seen since 2012 and the third successive year of a fall in in-store activity.
E-commerce sales are expected to rise by 3.6%, with around 40% of all spending taking place online.
Mark Antipof, chief commercial officer at Visa, commented: “While it still looks likely that consumers will be hitting stores and websites in search of bargains this Black Friday and Cyber Monday, we expect spending for the duration of the festive season to be lower in comparison to last year.”
“Looking back, consumers were in a sweet spot in 2016 – low inflation and rising wages meant there was a little extra in household budgets to spend on the festive period. 2017 has seen a reversal of fortunes – with inflation outpacing wage growth and the recent interest rate rise leaving shoppers with less money in their pockets.”
Visa said spending on transport and communication was set for the biggest decline, with expenditure on clothing and footwear also expected to decline. Food and drink spending is set to be flat.
Morning update
On the markets this morning, the FTSE has opened the week down 0.3% at 7,358.5pts.
Early fallers include Premier Foods (PFD) after its share price boost last week off the back of strong second quarter sales growth, which is down 3.8% back to 41.2p this morning. Also down is Sainsbury’s (SBRY), falling 1.7% to 223.8p, Nichols (NICL), down 1.9% to 1,685p and C&C Group (CCR), down 1.8% to €2.85.
Risers so far today include Hotel Chocolat (HOTC), up 2% to 364p, Dairy Crest (DCG), up 1.8% to 578.5p and WH Smith (SMWH), up 0.8% to 2,039p.
This week in the City
It’s set to be a quieter week after a flurry of recent activity – although all eyes in the UK will be on the Autumn Budget statement on Wednesday.
Chancellor Philip Hammond is expected to focus on housing and in particular renewed efforts to help first time buyers, while the market will carefully analyse any updated commentary on the ongoing Brexit negotiations and the wider impact on the UK economy.
Also the annual media – if not always shopper – frenzy around “Black Friday” continues as the event takes place this week.
In company news, tomorrow brings full-year results from Compass Group (CPG), while Tuesday will see the released of annual results from travel food specialist SSP Group (SSPG).
Thursday sees half year results from brewer and pub group Mitchells & Butlers (MAB), while Majestic Wine (WINE) is set to release its half year numbers on the same day.
There are also annual shareholders meetings for Finsbury Food Group (FIF) on Wednesday and Hotel Chocolat (HOTC) on Thursday.
Internationally, Remy Cointreau will issue its first half results on Thursday.
As well as the Autumn Budget, this week brings the CBI Industrial Trends Surveys tomorrow, the latest estimate on UK GDP in the third quarter on Thursday.
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