CONSUMER spending fell at its fastest rate for 13 years between July and September, official data revealed yesterday.
Household spending fell 0.2 per cent on the previous quarter, the biggest drop since the beginning of 1995, according to the Office for National Statistics.
Household spending is now just 1.1 per cent above a year ago, it said.
Overall nationa
l output fell 0.5 per cent during the third quarter of 2008, unchanged from the ONS's first estimate in October. There were falls in the consumption of food, alcohol and tobacco – while big-ticket items such as furniture, furnishings and car purchases were particularly hard-hit.
Transport costs made up the biggest slice of family household spending during 2007.
Families spent an average of £61.70 a week on transport, equivalent to 13.4 per cent of the total average household expenditure of £459.20 per week.
The ONS annual Family Spending report shows recreation and culture came second in household budgets at 12.5 per cent (£57.40 a week), including items such as televisions, computers, books and leisure activities.
Housing, fuel and power was the third-largest category at £51.80 a week (11.3 per cent), followed by food and non-alcoholic drinks at £48.10 (10.5 per cent).
The latest official figures come in the week Chancellor Alistair Darling attempted to get shoppers spending again with a temporary VAT cut from 17.5 per cent to 15 per cent for 13 months from next Monday.
The move is aimed at putting £12.5 billion back in the pockets of consumers.
Jonathan Loynes, chief European economist at Capital Economics, said: "The dip in household spending confirms that the housing downturn is hitting overall consumer activity hard.
"The 2.5 per cent cut in VAT won't do a great deal about that."
While the 0.5 per cent fall in output was unrevised, it represents the first quarter of economic contraction in 16 years and the UK's recession is set to be officially confirmed in January.
Countries such as Japan and the 14-member eurozone are already officially in recession – defined as two successive quarters of negative growth.
IHS Global Insight's Howard Archer warned: "It looks horribly like the fourth quarter will see even deeper contraction as the heightened financial crisis and deepening global slowdown increasingly reinforce the problems facing the UK economy."
One City economist said: "This brake on consumer spending is the clearest sign yet that the average person in the street is reining in all-round.
"That is partly to do with higher food and fuel prices, but is now also aggravated by redundancy fears."
The full article contains 447 words and appears in The Scotsman newspaper.
