Credit card spending by UK consumers fell in May for the first time in four years as consumers cut back leading up to the general election.
According to the latest figures released by Visa, consumer spending last month was 0.8 per cent lower year-on-year when compared with May 2016.
It was the first time that spending had fallen since September 2013, and sales fell by a larger margin of 1.9 per cent on a month-to-month basis from April figures.
Visa managing director, Kevin Jenkins, commented: ‘Our index clearly shows that with rising prices and stalling wage growth, more of us are starting to feel the squeeze.’
Inflation has risen to a three-year high of 2.7 per cent, largely due to the fall in the value of the pound since the Brexit vote. This has made imports more expensive. It also means that wages have dropped in real terms for the first time in three years.
Many retailers had hedging contracts to protect against the fall in the value of the pound, but most of these would have ended around the beginning of the year.
Sterling weakened again after last week?s inconclusive election result and businesses have said the election result risks paralysing the government at a time when it is meant to be negotiating a smooth exit from the European Union.
Retail sales in the first three months of 2017 suffered their biggest fall since 2010, with many of the major retailers feeling the pinch.
Fashion retailer New Look announced a 6.6 per cent fall in sales for the year, and high street stalwart Marks & Spencer reported a drop of 5.9 per cent in clothing and homeware sales for the first three months of 2017.
High street sales suffered the most with their biggest sales fall in five years. This was only partly offset by strong growth in online sales.
Annabel Fiddes, an economist at IHS Markit, which compiled the data for Visa, commented: ‘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.’
The Visa figures strip out seasonal and inflation effects, and are adjusted to take account of the growing share of spending on cards rather than cash.