- Quarterly growth dragged down by wet British summer; August had lowest increase in retail spending in 14 months
- September growth helped by extra spending in pubs, off licences, sports shops and supermarkets as fans got ready for the start of the Rugby World Cup
- Majority of consumers say they feel positive about their finances, and upbeat about their ability to spend on non-essential items
A combination of low prices, poor summer weather and more consumers heading away for a summer holiday, led to spending growth slowing compared to both the prior quarter and the same period last year.
Despite this, the underlying trend remains positive and it was the fifth consecutive quarter where growth has been above 3%. Spending grew by 4.6% in July – its joint-second highest level in ten months – but slipped back in August to just 3% – its lowest level since June last year, as the UK experienced above average rainfall and below average temperatures. Spending recovered slightly in September to 3.7%.
The UK suffered its coldest summer in three years, leading consumers to stay away from the high street – resulting in spending in-store falling from 1.9% year-on year in Q2 to 1% in Q3. Online growth remained strong at 14.3%.
During the rainy summer months, consumers sought indoor entertainment leading to strong annual spending growth in pubs (11.9%), tourist attractions (11.8%) and cinemas (8.9%).
Throughout the quarter, data shows strong non-essential spending on computer software, jewellery, record shops and books. Growth in these categories may point to consumers feeling confident in splashing out as most are feeling upbeat across our main measures of confidence – ability to live within their means (up by 3% to 73% in Q3); household finances (71%; up from 70% in Q2); discretionary spend (58%; up from 56% in Q2); and job security (52%; up from 48%).
“Falling levels of growth in most categories over the penultimate quarter of this year suggest that households have reined back on spending in advance of Christmas. But with Barclaycard research into consumers’ level of fiscal confidence painting a positive picture, it’s likely only to be a temporary breather.” Chris Wood, Managing Director at Barclaycard.
The start of the Rugby World Cup helped growth recover in September with increased spending in pubs, off-licences, sports shops and supermarkets. The entertainment, clothing and grocery sectors all performed strongly and contributed to an overall spending growth of 0.7% in September.
The welcome return of the last minute mini-break
The poor summer weather led to more Britons heading abroad, pushing up travel spend by 7% year-on-year in August. Almost half of consumer holidays (47%) were booked less than a month in advance and almost a third of respondents (32%) say that a last-minute holiday seems more affordable now than it did this time last year.
“It’s been a challenging year for the industry but overall numbers are up… It’s looking healthy for next year as well.” Mark Tanzer, Chief Executive, ABTA -The Travel Association
What’s holding some consumers back?
Despite positive economic momentum and widespread improvement in household finances, the majority of Britons are still feeling cautious about spending – especially on non-essentials. For many, higher living costs and flat wages remain a concern. Asked about their attitude towards nice-to-have items, almost three quarters (71%) say they are spending the same as – or even less than they were – during the recession. This suggests that many Britons are still living with a ‘downturn mindset’ which prevents them from enjoying their growing spending power.
“Consumer purchasing power was squeezed for an extended period… People haven't forgotten what things were like during the downturn.” Howard Archer, IHS Economics
Nearly a third (31%) are reluctant to splash out on non-essential items even though they also admit to having more money overall than they did a year ago, and value for money is a key driver for consumers as 72% say it’s the key factor when making non-essential purchases.
“People have become a lot more selective in their non-essential purchases... They save up for purchases that will benefit them, such as the Apple Watch or a new phone.” Robert Gregory, Global Research Director, Planet Retail
Consumer confidence spread across UK regions
In the third quarter of 2015, only the North West saw spending rise year-on-year. Northern Ireland, Wales, the South East and London all saw annual growth fall sharply compared to the second quarter. Those living in London are most likely (41%) to say they feel better off than they were expecting to be a year ago, whilst those in Wales (24%) are least likely to feel that they are, closely followed by those in the South West (27%).