Consumer spending growth fell to 2.8 per cent year-on-year in May, a 10-month low.
Consumer spending growth slowed to 2.8 per cent in May – despite Brits continuing to spend on the ‘experience economy’ – as overall confidence in household spending power cooled in response to inflation, which hit 2.7 per cent in April.
Data from Barclaycard, which sees nearly half of the nation’s credit and debit card transactions, revealed lower levels of growth across everyday essentials (3.1 per cent) when compared with the Easter-driven increase of 11.4 per cent in April. Shoppers spent less on groceries and fuel in particular, easing supermarket (1.5 per cent) and petrol growth (7.4 per cent), down from 10.3 per cent and 14.7 per cent the previous month.
Consumers also reined in their spending on household goods and clothing. Both categories declined 2.9 per cent year-on-year – albeit from strong figures recorded in May 2016 – to enter negative territory for the first time in three and five months respectively.
There were a handful of bright spots, with Brits still willing to dig deep into their pockets when it came to spending on the ‘experience economy’. While growth in discretionary categories slowed overall, at 2.8 per cent in comparison to April’s 3.7 per cent, entertainment performed strongly (up 12 per cent) as Brits enjoyed dining out with friends and family in restaurants (11.7 per cent) and catching the latest film releases at the cinema (11.5 per cent) including Guardians of the Galaxy Vol. 2 and the much-awaited sci-fi thriller Alien: Covenant.
Spending on hotels also increased (11.4 per cent) as consumers planned their summer breaks. Barclaycard’s consumer confidence research suggests this is likely to continue, as a third of Brits (34 per cent) indicate they prefer to spend on experiences rather than on physical items.
Although consumers still prioritise spending on leisure time compared to material goods, they are feeling increasingly cautious about their spending power overall. Just over half (53 per cent) say they feel confident in their household finances – the lowest level since Barclaycard started tracking confidence data in Q1 2015 and down from 70 per cent in March.
Consumers’ confidence in their ability to spend on non-essentials also dipped a further 2 percentage points in May to 41 per cent, with a slim majority (52 per cent) of Brits saying they are ‘feeling the squeeze’ due to a combination of inflation and subdued wage growth.
Of these, 69 per cent say the sentiment is because their weekly shop is more expensive than it used to be, and another three in 10 (31%) say it is because of increased fuel prices – highlighting the impact of rising prices on groceries and essentials more broadly.
Nevertheless, it seems some Brits will spend as usual this summer, with a fifth (20 per cent) planning to increase spending on entertainment next month. A similar proportion (22 per cent) will be splashing out on holidays.
Paul Lockstone, Managing Director at Barclaycard, said: “Consumer spending growth was subdued last month as shoppers paused for breath after an Easter bounce in April. With CPI running at its highest rate since 2013, it’s no surprise that more of us are starting to ‘feel the squeeze’ of inflation and slower wage growth, perhaps prompting small changes to our spending patterns.
“It’s far too early, however, to suggest that this is the beginning of a period of increased caution. In May we witnessed the resilience of the ‘experience economy’ and all signs indicate spending on leisure time will continue to be a priority. As we head into summer, it will be interesting to see how the spending picture might change after consumers reassess their household budgets.”
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