MNI DATA ANALYSIS: UK Visa Data Points To More Consumer Unease

     LONDON (MNI) - Whilst real wages have turned positive in the most recent

ONS data and average weekly earnings are near the important 3% mark, there

appears to be a lull in consumer spending and sentiment that cannot be ignored.

     --Divergence in Spending and Savings Intentions

     The Visa Consumer Spending Index signalled the worst quarter for spending

in over five years, with consumer spending declining 2.1% year-on-year,

following a 1.0% drop in February. Worth noting also is the March 2.1%

year-on-year drop is the tied worst year-on-year growth since October 2012.

     Furthermore, the Visa Consumer Spending Index shows a divergence with the

UK consumers' savings intentions over the next 12 months. Since October 2016,

the savings intentions index has shown an upward trend and the March figure of

19.6 is the highest index figure since June 2016. Both factors suggest that a

continuation of the decline in Visa spending growth is likely.

     Whilst, this diverging trend suggests that consumers would prefer to save

their future income rather than spend it, the nature of the survey has a slight

bias in that ex-ante, consumers are likely to respond positively to saving in

the future however ex-post they may not fulfil their prior intentions.

Nonetheless, the theme of a weak spending pattern holds validity.

     --Present Major Purchases Also Lower

     There also appears to be a downward trend in the European Commission's

major purchases index. Since peaking after a continued rise in August 2015 at an

index value of 14.3, the index has been moving downward and now sits at 0.1.

This would further imply that consumers do not feel encouraged enough to go out

and spend and would prefer instead to replenish their savings or reduce leverage

built up in the backdrop of Brexit uncertainty and negative real earnings until

very recently.

     --Unsecured credit not available to ease the pain

     The notion that consumers are more concerned with saving rather than

spending is unlikely to be helped by the availability of credit data from the

BoE. Unsecured credit availability for Q1 dropped sharply from -12.4 in Q4 to

-38.7 in Q1. This was the lowest in a data series stretching back to Q2 2007

with the previous low of -30.5 recorded in Q4 2008. The implications of this

could be that whilst consumers on aggregate are not looking to spend, those who

would through unsecured credit may find it harder to do so and therefore would

further the effect of a contraction in spending.

     In summary, consumers are either not willing to spend due to negativity

about the future environment or despite positive real wages are not able to

increase spending due to the prior depletion of their savings and increased

borrowing. It may also be a combination of the two factors. This is not

accommodated by the sharp decline in the availability of unsecured credit to

households and paints a unflattering picture for UK consumption.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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