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Consumer spending up 4.2 per cent in May as consumers cash-in on deflation

Tue Jun 09 09:00:00 EDT 2015

  • Falling prices, stronger wage growth and record-high employment led to consumer spending growth exceeding 4 per cent for the fourth consecutive month in May
  • Spend on non-essential items increased 6.2 per cent – with cinemas (28.5 per cent) and pubs (14 per cent) seeing the biggest increases
  • Apple Watch launch sees electronic spending jump from 4 per cent growth in April to 8.7 per cent in May 

As inflation turned negative for the first time in fifty years, consumer spending rose 4.2 per cent in May as falling prices combined with greater confidence gave consumers a reason to splash out a little more.

The latest monthly spend data analysis by Barclaycard shows that falling prices in supermarkets are helping families boost spending on non-essential items such as films and holidays. By spending less on essential items, which was down 1.4 per cent last month, households are able to spend more on enjoying themselves.

Non-essential spend grew 6.2 per cent in May, boosted by spending on entertainment activities which was up 12.5 per cent. This was driven by eating and drinking out, with spending on restaurants rising 16.7 per cent and spending in pubs increasing 14 per cent – the highest reading in the past 13 months. In addition, spending on cinemas went up 28.5 per cent, helped by the release of Avengers – Age of Ultron and the continued impact of Fast & Furious 7.

With the inclement weather seen in May 2015 – when maximum temperatures were at their coldest since 1996* – spending on travel also increased 7.7 per cent. The search for more sunshine resulted in significant gains in spending on airlines, which grew 3.6 per cent on May last year – double the growth seen in April – and  spending on hotels which reached 5.7 per cent.

Consumers also showed a return to investment in big ticket purchases, possibly as the certainty of the General Election result allowed them to plan ahead. Spending in furniture stores rose 9 per cent against the same time last year, recording its best performance in over two years. Meanwhile, the first full month in which the Apple Watch has been available saw spending in electronic stores jump from 4 per cent growth in April to 8.7 per cent in May – its highest level since the launch of the iPhone last September.

However, the strong start to the year in the retail sector turned out to be short-lived. Spending on clothing grew only 0.9 per cent, the lowest reading since June 2013, and spending in department stores slowed to 3.0 per cent. As consumers continued their search for value, though, discount stores proved the big winners, recording 11 per cent year-on-year growth.

Chris Wood, Chief Operating Officer at Barclaycard, said:

“With the wider economic context moving in their favour, the clear election result removing some of the lingering uncertainty of how household budgets might fare in the future, and deflation providing further opportunity to cut the cost of essentials, consumers have been quick to make the most of their increased spending power.

“Spending on entertainment and leisure, as well as bigger ticket items such as furniture, electronics and holidays was all up strongly in May. Consumers’ feeling of confidence is leading to them spending more on the enjoyable things in life.” 


Year-on Year Spend growth by category

Overall

Online

In-store

Clothing

0.9%

9.8%

–2.0%

     Family Clothing

–0.7%

4.5%

–2.4%

     Shoe Shops

0.0%

12.3%

–2.8%

     Women’s Clothing

2.7%

19.4%

–3.5%

     Men’s Clothing

11.3%

23.4%

7.1%

Restaurants

16.7%

52.7%

14.8%

Books, Newspapers & Magazines

–0.8%

1.7%

–5.5%

Auto Parts & Accessories

1.8%

8.1%

0.2%

Cinema, Theatre & Dance

–0.8%

–0.2%

–1.7%

Public Houses

14.0%

9.9%

14.0%

Department Stores

3.0%

15.5%

0.6%

DIY Stores

4.4%

3.1%

4.5%

Travel Agents

7.8%

17.3%

0.2%

Airlines

3.6%

11.1%

–21.0%

Supermarkets

0.4%

15.4%

–0.3%

Petrol

–8.3%

–8.3%

Gambling

9.7%

–1.6%

26.0%

Overall

4.2%

13.4%

1.7%

Average Transaction Value

Overall

–4.3%

Clothing

0.2%

Airlines

–2.1%

Restaurants

–4.5%

Supermarkets

–5.6%

Petrol

–7.5%

Spend Share

Clothing

26.8%

Travel Agents

48.6%

Number of Transactions

Overall

8.9%

Clothing

0.7%

Airlines

5.8%

Restaurants

22.2%

Supermarkets

6.5%

Petrol

–0.9%

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