European spending growth hits 9 per cent in the first quarter of 2010

- Card spending data reveal stronger than expected consumer recovery
- Initial data for April and May suggest positive trends in card spend have continued into Q2 2010
- European spending levels match improved consumer confidence figures

27th May 2010 – Consumer spending across Europe rose 9 per cent in the first quarter (Q1) of 2010 compared to the first quarter of 2009, according to the Visa European Spending Trends Report, produced in conjunction with Markit, a specialist provider of business surveys and economic indices.

The Report found that spending on Visa debit, credit and prepaid cards across the continent rose to €230bn compared to the first quarter of 2009 when Europeans spent a total of €198bn on their Visa cards. This pushed the annual rate of growth to 16.4%, up from 11.7% in the final quarter of 2009. After adjusting for the increase in the number of Visa cards issued, this means there has been a 9% year-on-year increase in nominal spend. Spending on Visa cards is therefore currently increasing at a quicker rate than prior to the recession when it peaked at 5.8% at the end of 2007.

While spending volumes have recovered, the average transaction spend is yet to return to the levels seen between 2005 and 2008. Over this period, the average card transaction was between €51-53 but this fell to a low of €48.8 in Q3 2009 and currently stands at 49.0. This was driven by consumers curtailing spending and lower retail pricing but is also attributable to the ever-growing number of people using their cards for smaller transactions. This latter explanation is supported by continued year-on-year growth in the average number of transactions per card.

Strong increase in card usage over the last decade means 11.2% of consumer spending at point of sale in Europe is now with a Visa card and more than 70% of that is on Visa debit cards. This means card data can provide a strong indicator of total consumer spending trends.

The Report, which was based on analysis of transactions on the 399 million Visa cards currently in circulation in Europe, found a strong correlation between the Visa data and European Commission figures on consumer confidence. The European Commission’s figures found that consumer sentiment about the current economic situation rose to a two-year high in Q1, having bottomed-out at the same time as the Visa data in Q1 of 2009.

Initial Visa data for April and May suggest that positive trends in card spend have continued into Q2 2010. Historically, Visa data have shown a slight lead on official retail sales numbers, most notably in 2008 and 2009 when the data provided an early warning of a sudden switch from strong spending growth to decline. The robust Visa figures for April therefore bode well for a continued consumer recovery in Q2.

Dr Steve Perry, Commercial Director at Visa Europe said: “Consumer spending was hit hard by the recession but has bounced back surprisingly quickly. Growth is now faster than it was before the recession. This is very positive for the health of the European economy as a whole as consumer spending is such an important engine of growth.

“Optimism needs to be tempered, however, as the economic situation in Greece and concerns about the fiscal position of a number of the other European states means that the outlook is uncertain and it remains to be seen whether spending will continue to grow at current rates.

“The past decade has seen a tremendous growth in the use of cards across Europe and more than €1 in €9 spent in Europe is now with a Visa card. Debit cards in particular are becoming the preferred payment method for many consumers and replacing the use of cash and cheques. This means that card spending provides an increasingly strong indicator of total consumer spending and supplements official figures.”

Chris Williamson, Chief Economist at Markit said: "The growth of spending on Visa cards provide a useful insight into changing consumer spending trends, and the data for the first quarter paint a surprisingly buoyant and encouraging picture. This strength is likely to at least in part reflect the growing trend towards using cards in preference to cash in many countries, and once inflation is also taken into account 'real' growth of consumer spending is likely to have been more modest. Nevertheless, these factors cannot account for all of the growth seen in Q1 and the data therefore suggest that the European recovery is showing some signs of broadening out from the corporate sector to households.

"Preliminary Visa data for more recent months support other survey data in suggesting that the recovery continued in Q2, and perhaps even gained momentum. However, it must also be remembered that this turnaround in spending over the last year has been supported by unprecedented government stimulus packages. Whether this performance can be sustained as we move into the second half of 2010 will depend on how resilient economic growth can remain in the face of the headwinds caused by the region's sovereign debt crisis, the unwinding of stimulus packages and the austerity measures required to reduce public debt."

For the full Visa European Spending Trends Report please follow the link below:

www.visaeurope.com/en/making_money_flow.aspx?utm_source=Press_release&utm_medium=PDF&utm_campaign=spending_index_PR

About Visa Europe

In Europe, there are over 399 million Visa debit, credit and commercial cards. In the 12 months ending March 2010 those cards were used to make purchases and cash withdrawals to the value of €1.4 trillion. 11.2% of consumer spending at point of sale in Europe is with a Visa card, and more than 70% of that is on Visa debit cards.

Visa Europe is owned and operated by more than 4,000 European member banks and was incorporated in July 2004. In October 2007, Visa Europe became independent of the new global Visa Inc., with an exclusive, irrevocable and perpetual licence in Europe. As a dedicated European payment system it is able to respond quickly to the specific market needs of European banks and their customers - cardholders and retailers - and to meet the European Commission’s objective to create a true internal market for payments.

Visa enjoys unsurpassed acceptance around the world. In addition, Visa/PLUS is one of the world’s largest global ATM networks, offering cash access in local currency in over 200 countries.

For more information, visit www.visaeurope.com

Contact details:
Visa Europe press office
Tel: +44 (0)20 7795 5336
E-mail: europeanmedia@visa.com