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Spending growth falls in real terms for second consecutive month as consumers remain cautious

04 Dec 2017 19:01

  • Consumer spending grew 2.8 per cent year-on-year in November – below the annual rate of inflation of 3 per cent and maintaining the muted levels seen throughout the second half of 2017
  • Spending on non-essentials saw a slight rebound on October as entertainment posted its highest growth rate since July 2017
  • Confidence in household finances fell from 64 per cent to 56 per cent month-on-month as inflation and the first interest rate rise in a decade weighed on sentiment
  • Value-seeking Brits plan to take advantage of sales periods to maximise their budget with Black Friday 2017 proving popular, recording a 32 per cent rise in transaction volumes

Consumer spending growth rose 2.8 per cent year-on-year in November, maintaining the muted levels seen throughout the second half of 2017. With inflation running at 3 per cent, it marked the second consecutive month where household expenditure contracted in real terms.

Data from Barclaycard, which sees nearly half of the nation’s credit and debit card transactions, reveals that consumers continued to manage their spending cautiously following months of rising prices and stagnant wage growth.

Tough times endured on the high street with in-store spending at -0.1 per cent, the seventh straight month in negative territory. Although online spending posted a double-digit increase of 10.8 per cent, this is down from an August high of 15.7 per cent, with November marking the third successive month in which growth in online spend has slowed.

Essential spending growth of 3 per cent was broadly in line with October’s figure (2.9 per cent). Growth in non-essentials, however, rebounded as consumers tweaked their allocation of spending on the ‘nice-to-haves’, rising 2.8 per cent from 2.2 per cent.

Airlines – which had posted a record-high growth rate of 10.9 per cent in October – fell out of favour, contracting 2.8 per cent year-on-year. Instead Brits opted to spend on leisure time with friends and family as the nights drew in, helping pubs (11 per cent) and restaurants (12.1 per cent) return to levels seen earlier this year, after a brief slowdown in the three months to October. This pushed up entertainment spending to 9.5 per cent, its best performance since July.

Electronic stores meanwhile finally stemmed 12 straight months of decline to enter positive territory, up 0.9 per cent year-on-year – possibly the result of shoppers upgrading to the newly released iPhone 8, iPhone 8 Plus and iPhone X. Men’s clothing also saw its best performance since July 2016 (8.1 per cent), although it wasn’t enough to revive clothing spend overall (-0.9 per cent).

November’s muted spending figures reflect the cautious mood of the nation. Only 30 per cent of consumers feel confident in the UK economy, down from 37 per cent at the end of September. A gap of 30 percentage points now exists between those who are confident and those who are not – the second widest since Barclaycard began tracking consumer confidence in 2014.

Confidence in household finances has also decreased, falling from 64 per cent in October to 56 per cent last month as inflation and the first interest rate rise in a decade weighed on consumer sentiment. Brits plan to continue spending conservatively, with a quarter (24 per cent) indicating they are less willing to splash out on non-essential items due to the rate hike, and a third (32 per cent) worried that rising prices – such as on food and drink – will force them to spend more on Christmas this year than they did in 2016.

Many savvy consumers, however, are trying to maximise their budget – indicated by a flurry of re-mortgaging activity from September in anticipation of the interest rate rise, and the fact that one in five (20 per cent) shoppers say that they plan to spend more on discounts during seasonal sales, from Black Friday and Cyber Monday through to Boxing Day.

Bearing this out, Barclaycard saw a 32 per cent rise in transaction volumes and a 7 per cent increase in values processed on Black Friday 2017 – with a record-high 998 transactions processed per second this year, beating the high of 771 transactions per second on Black Friday 2016.

Paul Lockstone, Managing Director at Barclaycard, said:

“Consumer sentiment has deteriorated over the last couple of months after a prolonged period of falling purchasing power. Against this backdrop, it’s not surprising that consumers continue to spend conservatively, leading to a second successive month of contraction in real terms.

“While entertainment spend brought some welcome relief, growth on essentials outstripped expenditure on nice-to-haves for the third month in a row, indicating that shoppers are prioritising carefully. Nevertheless, the search for value continues with Brits seeking sales and discounts, making the most of their budget during the festive season – as we saw with a strong performance on Black Friday.”

 

Y/Y Spend growth by category

Overall

Online

In-store

Clothing

-0.9%

10.1%

-5.9%

     Family Clothing

0.8%

16.9%

-5.8%

     Shoe Shops

-10.8%

-3.1%

-13.6%

     Women’s Clothing

-6.4%

-8.5%

-5.0%

     Men’s Clothing

8.1%

19.6%

1.6%

Restaurants

12.1%

28.1%

10.7%

Auto Parts & Accessories

-3.1%

10.0%

-7.2%

Cinema, Theatre & Dance

-3.7%

-4.8%

-0.3%

Public Houses

11.0%

-14.4%

11.3%

Department Stores

-4.3%

-1.6%

-5.1%

DIY Stores

0.9%

10.3%

-0.2%

Travel Agents

3.6%

12.3%

-5.5%

Airlines

-2.8%

-3.0%

-1.5%

Supermarkets

3.1%

11.4%

2.5%

Petrol

2.7%

-27.4%

2.7%

Gambling

11.5%

32.6%

-33.8%

Vehicle Sales

-8.9%

5.1%

-9.2%

Hotels

5.3%

26.7%

0.5%

Auto Repair Shops

-6.2%

-3.0%

-6.3%

Sports Shops

2.3%

5.9%

0.7%

Furniture Stores

14.1%

20.4%

12.8%

Telecoms

10.5%

31.3%

-2.5%

Household Appliances

0.8%

18.3%

-6.1%

Jewellers

-3.8%

6.6%

-5.7%

Sports and Games Establishment

2.9%

6.9%

0.5%

Garden Centres

3.8%

16.4%

2.2%

Discount Stores

3.6%

21.5%

-0.1%

Gift Shops

-1.7%

-10.9%

1.2%

Floor Covering Stores

1.7%

16.3%

0.4%

Tourist Attractions

5.3%

7.6%

3.5%

Amusment Parks

18.0%

41.3%

12.1%

Aquariums

-17.8%

32.1%

-26.3%

Electronic Stores

0.9%

13.8%

-6.6%

Cosmetic Stores

8.7%

17.1%

0.0%

Optical Goods

4.1%

14.1%

3.6%

Railways

-4.3%

5.7%

-7.3%

Overall

2.8%

10.8%

-0.1%

 

Online share of spend

Clothing

35.1%

Travel Agents

55.6%

 

Average Transaction Value

Overall

-6.0 %

Clothing

-1.6%

Airlines

-1.8%

Restaurants

-5.9%

Supermarkets

-3.9%

Petrol

-1.0%

 

Number of Transactions

Overall

9.5%

Clothing

0.7%

Airlines

-1.0%

Restaurants

19.1%

Supermarkets

7.3%

Petrol

3.7%

 

Notes to editors

For more information please contact Linda Yang on 020 3555 5586 or SiyuanLinda.Yang@barclaycard.co.uk.

The monthly spend data in this release relates to the period 22 October to 18 November 2017. It is compared with 22 October 2016 to 18 November 2016.

The Black Friday figures were taken from Barclaycard processing data between 00:00-17:00 on 24 November 2017.

The November consumer confidence data cited in this release are from YouGov Plc. Total sample size was 1,670 adults. Fieldwork was undertaken between 20th – 21st November 2017.  The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+). Consumer survey findings going back to 2014 were also carried out by Longitude Research on behalf of Barclaycard. There were at least 2,000 respondents, providing a representative sample of adult 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 

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