Consumers go on plastic spending spree

Consumers went on a January spending spree armed with their credit and debit cards, writes Diane Coyle. Plastic-backed spending soared to more than pounds 6bn despite record price cuts on the high street last month.

The industry statistics suggest that official figures for retail sales, due tomorrow, and for consumer credit next week, will show that January was another buoyant month for spending.

However, consumer confidence has dipped this month, returning to earlier levels after improving dramatically in January. Excluding that temporary jump, the trend in consumer confidence has now been flat for around two years, according to a survey conducted for the European Commission by the market research group GfK.

The confidence indicator fell to minus 10 in February compared with minus 11 in December and minus 5 in January. The biggest contribution to the fall this month was due to a drop in the balance of respondents planning a big purchase. The assessment of both general economic conditions and household finances during the next 12 months also turned gloomier, although there was more optimism about low inflation.

Economists said a decline in confidence this month was a surprise, but GfK warned that the scale of the increase in January might have been seasonal.

Figures from the Credit Card Research Group, a trade body for credit and debit card issuers, said spending on plastic cards last month was 16.1 per cent higher than a year earlier. The greater use of debit cards was the main factor driving this growth, up 23.3 per cent at pounds 2.5bn. But spending paid for by credit card was also up 11.4 per cent to pounds 3.5bn.

Spending using both types of card in retail outlets was up 18 per cent at pounds 3.7bn.