Consumer spending continues to gather pace. After a significant improvement in the third quarter of 2014, spending in the fourth quarter grew by 4.3% year-on-year – a rise of 0.1 percentage points. Our consumer survey offers further evidence of a favourable outlook, with almost half (43%) of respondents saying they plan to spend more in early 2015. These are promising signs for the future.
There are still variations in where consumers are spending, however. And retailers’ much-hyped efforts to push Black Friday and Cyber Monday in 2014 have had mixed results – pulling holiday spend forward, but not necessarily creating an increase in overall consumer expenditure.
Confidence finds its feet
In the early autumn of 2014, the prevailing wisdom was that we were in the midst of an economic recovery, but that consumers were still not feeling it in their pockets. At the end of the year, perception seems to have finally caught up with reality. Lower inflation and stronger wage growth mean Brits are now more likely than not to feel confident in their personal financial situation. After years of austerity, many are starting to consider purchasing luxuries for themselves and their families. Consumers are also thinking about big-ticket items, such as holidays and new furniture.
Our quarter three report showed that the better-off are more likely to be confident in their personal situation and outlook. This remains the case in the fourth quarter, but those in lower-paid jobs are catching up.
Increasing caution about the big picture
The UK may be showing signs of recovery, but consumers remain concerned about the global economic picture. Just 15% of survey respondents claim to have confidence in the European economy, compared with 19% in the third quarter. Less than a fifth (19%) have faith in the global economy, compared with 23% previously. Similarly, a notable proportion of consumers say they are still worried about their employment prospects and job security.
With the European Central Bank embarking on a programme of quantitative easing, and with volatility high in markets worldwide, consumers remain worried about the outlook. It will be interesting to see how consumer sentiment changes in time for our next report, which will focus on the first quarter of 2015, as the UK gears up for the General Election.
The global financial crisis has left consumers with a greater demand for value. Brits are increasingly savvy about what things cost, whether their personal financial situations are improving or not. As a result, we saw consumers ‘playing chicken’ with retailers in the run-up to Christmas, convinced there would be more discounts to come if they held out for longer.
The festive season in 2014 saw more than half of Brits say that they would ‘shop the sales’ on Christmas Day. This came as retailers announced that 2014 was, as expected, the year that click and collect became mainstream. Consumers have embraced the convenience of online retail and this trend looks set to strengthen throughout 2015.
In December 2014, we saw consumer spend grow by 4.4% – the fifth straight month where growth was 4% or above. Consumers may be growing in confidence, but our report shows that the financial crisis remains fresh in many people’s memory.
Chris Wood, Managing Director, Barclaycard
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