Consumer spending growth slowed to 2.9% in August, compared to a 2017 average of 3.8%, as Brits managed ‘the squeeze’ of higher inflation and subdued wage growth by shuffling their purchasing priorities, according to the latest data from Barclaycard.
Spending on entertainment (9.4%) faltered slightly – with pubs and cinemas slowing – as shoppers shuffled their priorities to accommodate for increased expenditure in other areas, such as clothing (3%).
Just over half (54%) of consumers feel confident in their household finances, down from a summertime high of 69% in June – with 47% saying they are ‘feeling the squeeze’ as a result of inflation
Spending on essentials increased at its slowest rate in 12 months, as supermarket growth cooled to 2.4 from 3.1% in July. Expenditure on the forecourt also hit the second-lowest figure since August 2016 (4.5%) thanks to lower prices at the pump.
Non-essential spending increased by just 3% in August – slackening from 3.8% the month prior – as entertainment growth retreated to 9.4% from 12.5% in July. Pub growth fell to single digits for only the second time this year (9.2%), and spend on cinemas and event tickets flatlined (0.4%) after the 24.3% boost seen in July. Consumers did still splash out on one aspect of the ‘experience economy’, however, with sustained momentum in restaurant spending (12.4%).
The drop in entertainment contrasted with increased spend on clothing, recovering from a contraction of 0.3% in July to rise 3% in August. Family clothing performed well in particular, up 4.5%, coinciding with ‘back to school’ preparations and new uniforms. Taken together, the reduction in entertainment spend and growth of clothing suggests families may be starting to make minor adjustments in spending to meet their needs on a month-to-month basis.
Balancing the books appears to be a top priority for Brits, as only five in ten (54%) now feel confident in their household finances, down from seven in ten (69%) in June. Almost half (47%) are still ‘feeling the squeeze’ due to inflation outpacing wage growth, while a further four in ten (43%) have admitted to changing their everyday spending habits in response to sustained higher prices.
Of those, six in ten (60%) visit discount stores more often, while over a third (35%) have had to cut back on entertainment spend – suggesting two approaches of consumers ‘consciously coping’ with their weakened purchasing power.
Paul Lockstone, managing director at Barclaycard, said: “Consumer spending growth slowed somewhat last month, with households paring back on both essential and discretionary purchases as part of an overall shuffle in priorities. While the adjustments made across the board were minor, spending on leisure time softened slightly in favour of increased spend on clothing – a reversal of what we saw in July.
“While the August data makes for interesting reading, it’s too early to suggest that this is the start of a new trend where consumers alter their spending patterns each month. As we head into the end of 2017, however, we’ll be looking to see if this approach continues and whether the ‘experience economy’, which started the year so strongly, will hold up in light of shifting priorities.”
