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Spending growth slows to 2.4 per cent as consumers show continued restraint with household finances

Inflation hits a five-year high of 3 per cent, maintaining pressure on families already ‘feeling the squeeze’

06 Nov 2017 19:01

  • Consumer spending growth fell to 2.4 per cent in October as Brits pared back across the board
  • Growth in spending on essentials (2.9 per cent) slowed year-on-year, but outstripped that of non-essentials (2.2 per cent), as shoppers cut back on ‘nice-to-haves’
  • Consumers are staying cautious amid concerns over the wider economic outlook, as three in 10 (31 per cent) said in October that an interest rate rise would change their spending patterns

Consumer spending growth slowed to 2.4 per cent year-on-year in October which, with inflation at 3 per cent, equated to a contraction in real terms. Brits cut back across the board to cope with their diminished spending power, and in anticipation of a potential interest rate hike. 

Data from Barclaycard, which sees nearly half of the nation’s credit and debit card transactions, reveals that spending on essentials (2.9 per cent) outstripped discretionary spend growth (2.2 per cent) for the second month running.

This slowdown in expenditure on ‘nice-to-haves’ was driven by a significant contraction in clothing spend (-4.1 per cent) – the lowest figure recorded since March 2013. Shoppers may have delayed updating their wardrobe due to the unseasonably warm weather, with many possibly choosing to wait until Black Friday to pick up bargains.

Consumers also reined in their spending on entertainment (7.9 per cent) which dropped below the 10.3 per cent average recorded for 2017 to date. October represented the third consecutive month of weakened growth in entertainment, from a summertime high of 12.5 per cent in July. While pub and restaurant spend remained strong (10.2 per cent and 11.8 per cent respectively), the increases failed to counteract a drop in cinema and ticket spending (-7.8 per cent), weakened by a lack of blockbusters and major ticket releases. Elsewhere, airline spending reached a record high of 10.9 per cent as turbulence in the industry may have prompted a spike in re-bookings for cancelled flights.

The overall trend of paring back indicates that many consumers have adapted to months of ‘feeling the squeeze’ of higher inflation and stagnant wage growth. This could be why six in ten (64 per cent) said they are confident in their own household finances.

Brits have a gloomy outlook on the UK economy, however, with just 31 per cent expressing confidence. This is the second lowest proportion in the last 12 months and down 6 per cent on September.

Many are also concerned about the near future, and the recent interest rate rise is likely to prompt them to make additional adjustments. In October, three in 10 (31 per cent) said they would need to change their everyday spending patterns to cope with an increase in the base rate – and just over a quarter (27 per cent) indicated a hike would put a dampener on their Christmas spending plans.

Paul Lockstone, Managing Director at Barclaycard, said:

“Household expenditure remained muted in October and, when taking into account inflation, equated to a decline in real terms. This is a reflection of consumers paring back to cope with their reduced spending power, a tactic which, for the moment, has given them confidence in their ability to manage their household finances.

“That said, last month many indicated an interest rate rise would affect their everyday spending. In light of the Bank of England’s announcement last week, it’ll be interesting to see how shoppers, who have so far demonstrated their resilience, continue to juggle the many demands on their budget. As we enter the run up to Christmas, Black Friday will be the first major opportunity to see whether consumers really do tighten their belts.”

 

 

Y/Y Spend growth by category

Overall

Online

In-store

Clothing

-4.1%

9.1%

-9.9%

Family Clothing

-3.2%

15.0%

-10.4%

Shoe Shops

-11.0%

-1.5%

-14.2%

Women’s Clothing

-9.3%

-8.2%

-10.0%

Men’s Clothing

5.4%

21.0%

-2.4%

Restaurants

11.8%

27.4%

10.5%

Auto Parts & Accessories

-1.1%

9.0%

-4.3%

Cinema, Theatre & Dance

-7.8%

-4.4%

-17.5%

Public Houses

10.2%

-13.9%

10.5%

Department Stores

-3.8%

0.8%

-5.0%

DIY Stores

-0.5%

8.5%

-1.5%

Travel Agents

3.6%

15.0%

-8.4%

Airlines

10.9%

12.5%

1.8%

Supermarkets

3.1%

11.6%

2.5%

Petrol

3.7%

-34.9%

3.7%

Gambling

4.2%

36.4%

-64.9%

Vehicle Sales

-13.6%

18.6%

-14.2%

Hotels

4.1%

25.7%

-1.2%

Auto Repair Shops

-9.6%

-4.3%

-9.8%

Sports Shops

0.7%

4.3%

-0.9%

Furniture Stores

17.5%

19.2%

17.2%

Telecoms

7.4%

24.6%

-3.5%

Household Appliances

-0.5%

20.6%

-8.3%

Jewellers

2.1%

14.4%

0.2%

Sports and Games Establishment

7.2%

16.5%

1.8%

Garden Centres

0.7%

11.1%

-1.0%

Discount Stores

4.6%

23.2%

1.1%

Gift Shops

0.8%

-4.0%

2.3%

Floor Covering Stores

1.1%

26.4%

-1.0%

Tourist Attractions

-0.3%

-0.1%

-0.5%

Amusment Parks

13.3%

27.9%

8.2%

Aquariums

-21.4%

17.7%

-28.7%

Electronic Stores

-8.9%

-10.8%

-7.7%

Cosmetic Stores

6.7%

11.9%

1.6%

Optical Goods

-0.6%

9.8%

-1.2%

Railways

-5.3%

-9.1&

-3.9%

Overall

2.4%

12.0%

-1.3%

 

Online share of spend

Clothing

34.9%

Travel Agents

56.5%

 

Average Transaction Value

Overall

-5.7%

Clothing

-1.5%

Airlines

2.4%

Restaurants

-7.0%

Supermarkets

-3.4%

Petrol

0.0%

 

Number of Transactions

Overall

8.6%

Clothing

-2.6%

Airlines

8.1%

Restaurants

20.1%

Supermarkets

6.7%

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 24 September to 21 October 2017. It is compared with 24 September 2016 to 21 October 2016.

The October consumer confidence data cited in this release are from YouGov Plc. Total sample size was 1,669 adults. Fieldwork was undertaken between 24th – 25th October 2017.  The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).  The September 2017 consumer survey findings were 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 organisations across the globe to offer their customers or members payment options and credit.

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