First fall in consumer spending since 2013

Consumer spending slipped back annually for the first time in nearly four years last month as shoppers turned more cautious in the face of "rising prices and stalling wages", new figures reveal.

Spending fell by 0.8% year-on-year in May - the first annual fall since September 2013, according to Visa (Xetra: A0NC7B - news) 's consumer spending index.

Last month's drop followed a 0.3% increase in April.

Spending on clothing and footwear declined by 5.2% annually in May, and was down 4.1% on household goods.

There was also a marginal decline of 0.6% in spending on food and drink.

The fall was driven by a 5.3% fall in "bricks and mortar" spending on the high street, but online spending was up by 6.9% year-on-year.

Kevin Jenkins, UK and Ireland (Other OTC: IRLD - news) managing director at Visa, said: "Our index clearly shows that with rising prices and stalling wage growth, more of us are starting to feel the squeeze.

"Bricks and mortar retailers had a particularly challenging month, with sales dropping at the quickest level in over five years, at a time when warmer weather and the May bank holidays would usually drive shoppers on to the high street."

However, figures showed shoppers were spending more money on experiences than goods.

Visa recorded a 3.3% increase on spending on hotels, bars and restaurants, plus a 2.2% rise in recreation and culture - although the data indicated a marked slowdown in these areas from 9.1% and 2.8% the previous month, respectively.

Mr Jenkins said the softer rates suggested "consumers were reining in their discretionary spending".

The tough times facing UK retailers come amid rising inflation, which climbed to 2.7% in April - its highest level for nearly four years - with the squeeze on household budgets intensifying at a time when wage growth is stuttering.

In real terms - taking into account inflation - wages fell by 0.2% in the first three months of 2017, the first time there has been a decline for two-and-a-half years.

Annabel Fiddes, an economist at IHS Markit (Stuttgart: A1139A - news) , which compiles the index, said: "The outlook for consumer spending continues to look relatively bleak, with households facing faster increases in living costs and muted wage growth.

"The squeeze on household finances is likely to get worse as the Bank of England forecasts faster increases in consumer prices in the coming months.

"Combined with relatively low levels of consumer confidence, uncertainty around the outcome of Brexit and a slowdown in UK economic growth, it's likely we will continue to see weaker expenditure trends at least in the near-term."

The official retail figures for May - month-on-month and year-on-year - are expected later this week.