Consumer spending jumped 4% cent year-on-year in December – outperforming the Q4 average of 3.2% – to mark the first occasion in three months when spending outpaced the rate of inflation.
However, the latest data from Barclaycard found that while shoppers loosened the purse strings to enjoy Christmas and take advantage of seasonal sales, they remain cautious about prospects for the year ahead.
Growth in both essential (3.7%) and discretionary (4.2%) spending climbed above the prevailing rate of inflation to help boost December’s figure. Supermarket spending grew 3.5%, the highest of the quarter, as food prices continued to rise.
The uplift in non-essential spend was partially driven by strong growth in airlines (6.1%) and clothing (4.1%), with consumers taking advantage of cut-price deals as part of month-long discounting events such as Black Friday. Electronics also saw a welcome uplift as a result, rising 1.9% to record a second consecutive month of growth after having been in negative territory since October 2016.
Spending on pubs during the month climbed 8.3% during the month, whilst restaurants experienced a 9.7% uplift. However, spending in cinema, theatre & dance fell 3.8%.
The sales period proved a hit for ecommerce retailers, with online spending up 14.% in December. In-store spending also grew, up 0.3%– the first month of growth since April 2017, with some retailers revealing a better-than-expected Christmas in recent trading statements.
Despite the majority of consumers increasing their spending across the board, the proportion of those expressing confidence in the UK economy remains relatively low at 34%– particularly when compared to the 61% who say they do not feel confident. This gap in sentiment has steadily widened on average from September 2016 when the proportion of those feeling confident (48%) was greater than those who were not (47%).
Brits remain cautious about the year to come; more than four in 10 (42%) believe that the economy will deteriorate to some extent during 2018. Speculation about further interest rate rises is also weighing on shoppers’ minds, with almost half (46%) worrying about the impact of a hike in rates on their perceived spending power – the joint-highest proportion since Barclaycard started asking this question in Q1 2015.
With the money they put aside, many Brits will continue to fuel the ‘experience economy’; three in 10 shoppers (31%) plan to spend more on leisure time with friends and family over physical goods this year.
Paul Lockstone, managing director at Barclaycard, said: “Following months of consumers ‘feeling the squeeze’ of inflation, spending in December was comparatively robust, boosting an otherwise muted quarter. It’s reassuring to see that we continue to prioritise the festive period as a time to spend on celebrations with friends and family, although many of us took advantage of the sales to do this, indicating we are now a nation of value seekers.
“Much as we saw in 2017, caution continues to be the prevailing sentiment amongst Brits, however. As we head into 2018, it will be interesting to see whether consumers rein-in after Christmas in anticipation of future financial shocks, and what methods they use to help keep their budgets on track.”
