Consumer spending grows 3.8 per cent in February as household expenditure stabilises
· Consumer spending grew 3.8 per cent year-on-year in February, marking the third consecutive month in which growth rose above the prevailing rate of inflation
· Spending growth in supermarkets (3.2 per cent) softened from a peak of 4.4 per cent in January, helping expenditure on non-essentials (3.8 per cent) outpace that on the ‘must-haves’ (3.4 per cent)
· Entertainment remained strong, driven by 7.4 per cent growth in cinema and theatre spending as Black Panther and the much-anticipated second release of Hamilton tickets boosted Britain’s box offices
· Consumer confidence in household finances remains subdued, with half of Brits worrying that the outcome of Brexit negotiations will have a negative impact on their purchasing power
Consumer spending growth held steady in February – up 3.8 per cent year-on-year and in line with the three-month rolling average (3.9 per cent) – as consumers made small adjustments to their budgets to make room for the ‘nice-to-haves’.
Data from Barclaycard, which processes nearly half of the nation’s credit and debit card transactions, shows that supermarket spending (3.2 per cent) returned to levels seen over the past six months after a spike of 4.4 per cent in January. This kept expenditure growth on essentials, of which supermarket spend is a major component, to 3.4 per cent. As consumers continued to prioritise the ‘experience economy’, spending on non-essentials reached 3.8 per cent.
Entertainment was a driving force, performing strongly at 8.6 per cent. This was bolstered by cinema and theatre spending rebounding from five months of contraction to rise 7.4 per cent year-on-year, as Black Panther and the much-anticipated second release of tickets for the musical Hamilton boosted purchases at the box office.
Restaurants and pubs, meanwhile, remained healthy at 9.7 per cent and 10.0 per cent growth respectively, albeit not quite matching the strong spells of double-digit rises seen in 2017.
Continuing the trend of consumers seeking out experiences, travel spending jumped 7.4 per cent year-on-year – the highest level seen since December 2016, driven by a strong increase in airlines (6.8 per cent). This growth could be set to continue as one in four consumers (25 per cent) say they plan to spend more on holidays in the month to come.
Yet despite this propensity to spend on entertainment and travel, the mood amongst UK consumers remains subdued, with political uncertainty weighing heavily on consumers’ minds. With this month marking precisely one year before the UK is set to split with the EU, Brexit continues to be a cause for concern, with half of consumers (50 per cent) worrying that the outcome of negotiations will leave them worse off than they are now – a rise of 4 per cent compared to the month before.
More generally, consumers remain downbeat about their current spending power, with only half (54 per cent) feeling confident in their household finances, in line with January’s lacklustre levels. Rising prices are still causing many to feel the pinch: four in ten (39 per cent) Brits report they have less money to spend now than they did this time last year. Of these, two-thirds (67 per cent) say it is because their weekly shop seems more expensive than it used to be.
Paul Lockstone, Managing Director at Barclaycard, said:
“This is the third consecutive month that we’ve seen household spending growth above the prevailing rate of inflation suggesting that, while consumers remain cautious about their household finances, they continue to strike a balance between spending on essentials and on luxuries, whether that’s a holiday abroad or tickets for the latest blockbuster.
“With a year to go before Brexit, consumers are cautious about the potential ramifications of whatever settlement the UK achieves, and half of us fear that the outcome will leave us worse off than we are now. As negotiations continue it’s likely that this will continue to weigh on sentiment.”