Spending Slows Amid Rising Prices
Britons are feeling the squeeze of inflation, with consumer card spending growth slowing to just 3.6% in May, a stark contrast to the soaring CPIH inflation rate of 7.8%. The tightening of purse strings has led to a noticeable dip in discretionary purchases, although the May bank holiday weekends did offer some respite, particularly for the hospitality and entertainment sectors.
Grocery Bills Surge as Shoppers Face “Shrinkflation”
Supermarket spending jumped by 8.9% year-on-year, the highest increase in over two years, driven by the dual impact of near-record food price inflation and celebratory events like the Coronation bank holiday. However, the phenomenon of “shrinkflation” is causing concern, with a majority of consumers noticing smaller product sizes for the same or higher prices, particularly in categories like chocolate and crisps.
Fuel Spend Declines as Prices Fall from 2022 Peaks
May also saw a third consecutive month of reduced spending on fuel, down 10.7% from the previous year, reflecting a decrease in prices from the highs seen during the aftermath of the Russian invasion of Ukraine.
Weather and Cost-of-Living Impact Wardrobe Updates
The unpredictable May weather and rising household bills have led to a significant cutback in spending on clothing, which saw the largest drop in over two years. Consumers are also rethinking their summer fashion purchases, with many choosing to re-wear last year’s outfits or turn to discount stores in search of better value.
Bank Holidays Bring Cheer to Pubs and Entertainment
Despite a general reduction in eating out, the bank holiday weekends encouraged Brits to socialize, resulting in increased spending at pubs, bars, and clubs, as well as on other entertainment activities. The finale of the TV series ‘Succession’ and other popular shows also boosted digital content and subscription services.
Travel Sector Takes Off as Staycations Decline
With summer on the horizon, airline spending has soared by over a third, suggesting a renewed interest in overseas holidays. This contrasts with a decline in spending on hotels and accommodation in the UK, indicating a potential shift away from staycations.
Consumer Confidence Remains Despite Economic Challenges
Despite the cost-of-living pressures, a majority of Brits remain confident in managing their household finances and living within their means. There is also a slight uptick in confidence regarding the future of the UK economy.
Experts from Barclays highlight the ongoing consumer focus on everyday spending and concerns around “shrinkflation”. While discretionary purchases are being sacrificed, there’s still room in budgets for social and holiday spending. However, the broader economic outlook suggests potential stagnation as the effects of monetary tightening are felt.
The data, reflecting consumer card transactions from Barclays, underscores the cautious approach UK consumers are taking as they navigate the current economic landscape.