Consumer Card Spending Up By Only 1% Compared To 2023

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6 June 2024 – Surprisingly, consumer card spending has hit a three-year low, even with falling inflation.

In April, inflation hit 2.3%, a far cry from October 2022’s 11.1%—the highest in 41 years. This fall was supposed to boost consumer spending.

But in reality, many are still pinching their pennies despite recovering consumer confidence due to falling inflation.

Rising household bills top factor influencing consumer spending

The Barclays Consumer Spend report revealed that consumer spending has increased to a meagre 1% since May 2023, the lowest figure since the post-pandemic era of February 2021.  

Included in the report was a survey of 2,000 consumers, of which 87% quoted rising household bills as the most significant factor affecting personal expenses.

Aside from this, 79% of Britons are most worried about broadband and mobile costs. For example, subscribers of one of the largest broadband providers, BT, should expect a 7.9% (the CPI rate + 3.9%) mid-contract 2024 price increase.

76% are worried about making payments for their water bills. Meanwhile, dental costs were the most significant deciding factor behind reduced card spending for 75% of those surveyed.

Brits held back spending for non-essentials

Spending on non-essential items only increased by 0.7%, the smallest increase since February 2021. Fast food and takeaways also fell 0.2% in May, the first fall since May 2020.

This reduced consumer card spending is a huge blow to the food industry, as 44% focused on cutting off non-essential expenses.

54% chose to reduce ordering takeaways, while 53% cut back on dining out.

The travel industry also has it rough. At 4.3%, travel agents had the smallest growth since August 2023. Meanwhile, plane ticket sales saw the smallest increase, at 5.6%, since July 2021.

Optimistic spending data due to better weather and upcoming events

Of the 2,000 surveyed by Barclays, 28% said they would spend more when better weather arrives. For 18- to 34-year-olds, this number rises to 39%.

Findings from another independent survey also support this particular behaviour. The British Retail Consortium and KPMG report showed an annual increase of 0.7% for online and in-store retail sales, a massive recovery from April’s 4% yearly decrease.

SMEs can also expect sales to improve as sporting events like the Olympics and Wimbledon come. Karen Johnson, head of retail at Barclays, also mentions optimistic views for upcoming events such as Taylor Swift’s The Eras Tour, which will undoubtedly stimulate the airline, hospitality, and retail industries.

Presently, data from the British Retail Consortium shows a significant boost in sales of DIY and gardening equipment. Additionally, the computing market is hot as many consumers upgrade devices bought during the pandemic.

According to a report from the Chartered Institute of Procurement and Supply and S&P Global, the manufacturing industry also showed signs of recovery in May. Business optimism is returning, and output is at its fastest pace in more than two years.

Small businesses might find it confusing if this is a period of growth or vigilance.

Many signs point to consumers cutting back on expenses, while others indicate a future improvement in sales.

The underlying direction of travel remains though, with falling inflation, real income growth and low unemployment all pointing to a gradual acceleration in consumer spending over the next 12 months, especially as we begin to see the Bank of England reduce interest rates in H2.

Jack Meaning, Chief UK Economist at Barclays

Our opinion

When inflation figures were falling, everyone thought that things would start to improve. But Barclay’s figures about consumer card spending in May doesn’t seem to support that optimism.

And the reason for this is simple: people don’t really feel any better off yet. Let’s not forget that while inflation has been falling, prices have still gone up, albeit at a slower rate.

This means that prices are still high, and many people also have to pay higher mortgage rates, which means budgets are still tight.

And while energy bills have also fallen, they are still higher than they were a few years ago. And they are forecasted to go back up come autumn. On top of that, many other bills have or will go up, such as for water, broadband and insurance.

But with consumer confidence rising and many people planning on spending more in summer, small businesses should be optimistic. This summer we also have the Euros and the Olympics, both events which will hopefully stimulate spending.

Of course, there is also a general election on the horizon, which will take place on 4th July. Depending on who will get into No. 10, we might see more optimism and policies stimulating the economy.

So while things do still look bleak for now, let’s not lose hope. But it’s important that you get your marketing in shape, so that you can stand out from the crowd.

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The Business4Beginners news team consists of several writers who each have their own unique experience in businesses. By keeping their fingers on the pulse, they bring you the latest in news and trends impacting small UK businesses.
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