European consumer spending up 1.2% in Q3 2010, shows card expenditure data

Consumer spending across the EU grew 1.2 per cent in the third quarter (Q3) of 2010 against the same quarter in 2009, according to the Visa Europe EU Consumer Spending Report, produced in conjunction with Markit, a specialist provider of business surveys and economic indices.

Q3 registered the lowest growth rate for the year so far, according to card spending data, indicating that household consumption made only a marginal contribution to EU GDP in Q3. In Q1 and Q2, year-on-year growth was recorded at 2.6 per cent and 1.9 per cent respectively. Although the latest increase maintained the recovery in spending that has been evident over the past year, the rate of growth is below the average seen prior to the financial crisis.

The Report found that €242bn was spent on Visa debit, credit and prepaid cards across the 27 EU countries in Q3, compared to €202bn in Q3 2009. This figure is unadjusted for card issuance, payment preference and inflation. These figures highlight the importance of adjusting the data as the 19.6% growth signals the increasing preference amongst European consumers for card use, particularly debit cards.

Household spending levels were generally subdued across the EU. Unsurprisingly, some of the most troubled Eurozone economies, including Greece and Ireland recorded particularly marked declines in spend reflecting the severe economic difficulties that these nations are presently facing. However, the figures for Eastern Europe including the Czech Republic, Hungary and Poland were more positive as were the figures for France and the UK where spending was robust.

“The most troubled economies of the Eurozone, in particular Greece and Ireland have recorded some of the biggest falls in spending. The picture is more positive in some of the large European economies including France, the UK and also in Eastern Europe where relatively robust growth has been recorded. We expect overall spending levels to exceed those seen in 2009 but the European consumer is proving to be cautious as the continent slowly moves towards recovery”, Phil Symes, Chief Financial Officer at Visa Europe said.

“The Visa card spending data add further to evidence of a fragile economic recovery in Europe. Although there is some encouragement from higher spending in France and the UK, ongoing weakness in Germany ensures that overall household consumption levels in Europe remain relatively subdued. Growth is therefore likely to remain sluggish going forward and primarily dependent on export sales to Asia and the USA”, stated Chris Williamson, chief economist at Markit.

The report, which was based on an analysis of transactions on the 227 million Visa cards in circulation in the EU, highlighted a correlation between the Visa data and European Commission figures on consumer confidence, which have equally provided evidence of a subdued recovery in household spending. When combined with the rise in unemployment and government austerity measures across the continent, the Report suggests that growth is set to be sluggish at best heading into 2011.