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Consumer spending grows 3.9 per cent in January as essential expenditure rises to seven-month high

Softening consumer sentiment reflected in discretionary spend slowdown

Mon Feb 05 19:01:00 EST 2018

  • Consumer spending grew 3.9 per cent year-on-year in January, driven by a 4.1 per cent increase in spending on everyday essentials, with rising prices leading to a strong uplift in supermarket expenditure 
  • Spending growth on non-essentials was 3.8%, down from 4.2 per cent in December, with clothing and travel recording weaker growth than the month prior
  • Entertainment remained a bright spot, driven by double digit growth in pubs (12.8 per cent) and restaurants (10.5 per cent), as Brits cured the January blues with meals and evenings out with family and friends
  • Consumers’ confidence in the UK economy fell to 29 per cent – the second lowest level seen in the past 12 months

Consumer spending performed robustly in January, growing 3.9 per cent year on year, partially driven by price increases that continued to drive uplifts in ‘essential’ spending, such as the weekly supermarket shop.

Data from Barclaycard, which processes nearly half of the nation’s credit and debit card transactions, shows that spending on day-to-day necessities surpassed 4 per cent for the first time in seven months as inflationary pressures fuelled a strong start to the year.

This was driven by a similar seven-month-high increase for supermarket spend, which rose 4.4 per cent year-on-year.  In contrast, growth in discretionary categories slowed, falling to 3.8 per cent as consumers pared back on ‘nice-to-have’ items to balance the books.

Spending on clothing (1.6 per cent) and travel (4.5 per cent) saw weaker growth, especially when compared with December figures of 4.1 per cent and 7.3 per cent respectively. This suggests that, for many consumers, this year’s January sales proved to be less of a lure than the increasingly popular Black Friday and pre-Christmas discounting period.

The ‘experience economy’ remained a bright spot, as Brits continued to prioritise leisure activities. Entertainment spend recorded growth of 9.4 per cent, as consumers splashed out in pubs (12.8 per cent) and restaurants (10.5 per cent) to help cure the ‘January blues’.

Yet despite this increased propensity to spend on social occasions, concerns around the wider economic picture are evident. In the wake of a broadly positive December, when six in 10 Brits expressed confidence in their household finances, just 54 per cent now say the same. Confidence in the UK economy is also deteriorating; just 29 per cent of consumers say they feel confident. At the same time, almost half (46 per cent) of Britons worry that the ongoing Brexit talks will leave them worse off. The gap between those confident in the UK economy and those not confident has steadily widened on average since September 2017.

There is evidence, too, of a future fall in perceived spending power as a result of inflationary pressures. More than half (54 per cent) of Brits say that additional rises in supermarket prices would force them to cut back on spending, with 29 per cent saying the same about rising fuel prices, and one in eight (13 per cent) saying they would cut back amid news of job losses or business uncertainty in the UK.

Paul Lockstone, Managing Director at Barclaycard, said:

“January’s uplift in spending represents a strong start to the year. But faltering confidence levels across the board suggests that consumers are feeling the effects of a post-Christmas slump, as well as the wider impact of inflation, on their everyday lives.  

“While spending on the ‘experience economy’ proved to be a natural and welcome antidote to the January blues, the dip in sentiment revealed by our consumer confidence data, allied to concerns over economic and political uncertainty, is quite telling. It suggests that caution will continue to be the watchword for many consumers as they allocate their household budgets in the months ahead.” 

 

Y/Y Spend growth by category

Overall

Online

In-store

Clothing

1.6%

11.4%

-3.6%

     Family Clothing

3.0%

16.7%

-3.8%

     Shoe Shops

-7.2%

0.4%

-10.5%

     Women’s Clothing

-2.5%

-2.5%

-2.5%

     Men’s Clothing

10.4%

17.5%

6.2%

Restaurants

10.5%

30.7%

8.6%

Auto Parts & Accessories

-2.6%

9.8%

-6.8%

Cinema, Theatre & Dance

-0.5%

-2.9%

4.9%

Public Houses

12.8%

-4.3%

13.0%

Department Stores

-2.4%

1.2%

-3.6%

DIY Stores

-2.3%

-5.4%

-1.9%

Travel Agents

4.3%

11.8%

-4.2%

Airlines

3.2%

2.8%

5.7%

Supermarkets

4.4%

9.0%

4.1%

Petrol

2.0%

-14.1%

2.0%

Gambling

14.0%

31.9%

-28.1%

Vehicle Sales

-5.5%

3.7%

-5.7%

Hotels

4.8%

26.1%

-2.6%

Auto Repair Shops

-4.4%

-11.0%

-4.1%

Sports Shops

-1.1%

3.8%

-3.3%

Furniture Stores

-0.4%

13.0%

-3.1%

Telecoms

2.2%

1.7%

2.5%

Household Appliances

-5.0%

-3.6%

-5.7%

Jewellers

3.8%

11.9%

2.3%

Sports and Games Establishment

4.0%

14.2%

-2.3%

Garden Centres

5.5%

7.9%

5.1%

Discount Stores

5.7%

10.4%

4.4%

Gift Shops

5.1%

-7.8%

9.1%

Floor Covering Stores

-3.1%

10.6%

-4.5%

Tourist Attractions

3.4%

9.9%

-2.7%

Amusment Parks

8.4%

12.2%

7.3%

Aquariums

-22.9%

38.7%

-34.0%

Electronic Stores

-5.1%

4.4%

-9.3%

Cosmetic Stores

13.8%

8.2%

12.2%

Optical Goods

-1.4%

10.9%

-2.2%

Overall

3.9%

11.7%

0.6%

 

Online share of spend

Clothing

38.7%

Travel Agents

58.2%

 

Average Transaction Value

Overall

-4.2%

Clothing

-0.6%

Airlines

0.0%

Restaurants

-4.0%

Supermarkets

-1.9%

Petrol

-0.5%

 

Number of Transactions

Overall

8.6%

Clothing

2.3%

Airlines

3.2%

Restaurants

15.0%

Supermarkets

6.5%

Petrol

2.5%

Notes to editors

For more information please contact Charlotte Brocklebank on 020 7331 5478 or charlotte.brocklebank@cohnwolfe.com

The monthly spend data in this release relates to the period 24 December 2017 to 20 January 2018. It is compared with 24 December 2016 to 20 January 2017.

The consumer confidence survey was carried out between 22 and 23 January 2018 by Longitude Research on behalf of Barclaycard. There were 1,621 respondents, providing a representative sample of UK consumers by age, gender, region, income group, professional status and family situation.

About Barclaycard

Barclaycard, part of Barclays Bank PLC, is a leading global payment business that helps consumers, retailers and businesses to make and take payments flexibly, and to access short-term credit and point-of-sale finance. In 2016 we processed over £250bn in transactions globally. Barclaycard is a pioneer of new forms of payment and is at the forefront of developing viable contactless and mobile payment schemes for today and cutting-edge forms of payment for the future. We also partner with a wide range of organisations across the globe to offer their customers or members payment options and credit.

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