Brake on UK consumer growth, Visa figures show

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.

The survey by payment card company Visa may also undermine sterling.

Visa 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 the UK’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 said last week that he would keep a close eye on whether consumer demand weakens in line with the central bank’s expectations. Last week, pension firm 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.

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 the UK. 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.

Economists say it was a taster ahead of inflation data released later today, which is expected to stay comfortably above the Bank of England’s 2% target, keeping the pressure on disposable incomes and potentially sterling.

“You could see the correction in the pound extend this week if the data continues to be weak,” said ING strategist Viraj Patel.