Consumer spending growth slowed to just 1.6% in March, its lowest level in two years, as consumers reined in purchases in nearly all categories, according to the latest data from Barclaycard, which processes nearly half of all credit and debit card transactions in the UK
The figure marked the third successive month of a spending slump and dragged down overall growth for the first three months of the year to 2.8% – the worst performance in seven quarters.
However, consumers who stayed in the UK continued to treat themselves and their families, with pubs and restaurants two of a small number of categories to maintain a strong level of growth in March, both up 11.9 per cent, boosted by Easter and Mother’s Day.
Cinema spend was the star performer, climbing 12.8%, helped by the release of Batman v. Superman and the continuing popularity of Zoolander No. 2 and Deadpool.
With the long Easter weekend at the end of the month, Brits were prompted to entertain at home, pushing supermarket spending up 2%, the strongest rate of growth in 14 months. Barclaycard research found people are increasingly compartmentalising their regular grocery shopping, with one in two (51%) using a combination of discount and mainstream stores to get the best deals on their weekly shop.
Consumer thriftiness comes as households face a challenging economic landscape. Only one in three (34%) Brits feel upbeat about the UK economy, fewer than at any time since Barclaycard began collecting this data in Q3 2014.
This may be why nearly one in two (47%) said they have been more cautious with their spending during the past few months, reflected in Barclaycard data which saw non-essential spending grow at 2% in March – the lowest rate in more than two years.
Subdued wage growth is also having an impact on consumers’ outlook. Average real earnings are about 6% below their 2008 level and just one in four (26%) is confident that their personal spending power will rise during the rest of the year.
Paul Lockstone, managing director at Barclaycard said: “Since the turn of the year we have seen a steady fall in the rate of spending growth, but the continuing impact of global economic headwinds and an uncertain outlook really caught up with consumer spending in March. Spend on non-essential items grew at the slowest rate since 2014, while the emerging trend for compartmentalisation in the weekly shop, with people willing to mix and match between discount stores and more established high street retailers, suggests shoppers continue to place a premium on value for money.
“Some sectors did show encouraging signs, however – notably entertainment and leisure – as consumers continued to spend on experiences, often with loved ones or their families. Looking ahead, it’ll be interesting to see whether shoppers continue this trend, particularly if confidence in the economy continues to wane.”
