Karen Johnson, Head of Retail at Barclays, explores why the final stretch of summer saw a rise in feel-good spending, and what might be in store as we head into the Golden Quarter.
The standout trend of Q3 was consumers choosing to spend more on items that spark joy. Back in August, just under half (47%) of Brits said they were happy to spend their disposable income on little luxuries that make them happy, even when making cutbacks. The following month, that number had climbed to 53%, with sweet treats such as pastries consistently coming out as the most popular pick-me-up.
This shift is evident in our latest Consumer Spend data. Year-on-year growth in non-essential spending nudged up from 0.6% in Q2 to 0.8% in Q3, while essential spending slipped into decline, falling from 0.7% to -0.2%.
Looking closer, health and beauty – whose performance in tough economic times is often referred to as the ‘lipstick effect’ – cemented its position as the most resilient category in the retail sector, achieving year-on-year growth of 7.4% for the quarter, up from 5.4% in Q2.
Clothing, which ranked #5 on the list of the UK’s favourite mood-boosters in our research, also had a positive three months, bouncing back from a year-on-year decline of -3.8% in Q2 to end Q3 on par with last year, up 0.2%. I suspect that much of this recovery was driven by discounting and promotional activity, as retailers sought to sell off excess stock from earlier in the year, when the unseasonal weather hampered demand.
"Health and beauty cemented its position as the most resilient category in the retail sector, achieving year-on-year growth of 7.4% for the quarter, up from 5.4% in Q2."
Karen Johnson, Head of Retail, Barclays
Deal-seekers chase loyalty discounts
To accommodate these increases in discretionary spending, Brits are being more thrifty when it comes to their essentials. In September, seven in 10 shoppers said they were looking for ways to get more value from their weekly shop – higher than the 67% average for 2024 as a whole – with half of these consumers actively trying to save by searching for supermarket loyalty scheme deals.
The ever-increasing search for value has also placed a spotlight on what some are calling ‘double-dip shrinkflation’ – in August, one in four consumers (26%) said they had noticed products which had gone through two or more rounds of size cuts, without a reduction in price. Chocolate (57%), crisps (44%), packs of biscuits (41%), snack bars (36%) and sweets (36%) have been the worst hit, according to this group. In September, supermarket spending was down -1.1% compared to last year, which could be the start of consumers protesting against shrinkflation by cutting back on those particular products, or switching to cheaper or own-brand versions.
A nation of experience enthusiasts
Q3 was also a strong quarter for spending on experiences. It started with Euro 2024 in July, which captured Brits’ minds and wallets, and provided pubs, bars and clubs with a much-needed boost. On the day of England’s final against Spain, pub spending was almost triple what it had been on the same day in 2023 – and that spike could have been even greater if England had been victorious, with pints being pulled late into the night.
However, with so many of us watching the football, entertainment began the quarter on more shaky ground, down -6.6% year-on-year in July. It wasn’t until September when the cavalry arrived to turn things around, in the form of Liam and Noel Gallagher. I tried and failed to get tickets for the Oasis reunion tour, but thousands managed to secure theirs on release day, causing entertainment spending to skyrocket to six times the daily average for the month. For September as a whole, entertainment spending was up 14.4% – the highest uplift recorded since July 2023 (15.8%), when the pre-release for Taylor Swift’s Eras tour resulted in a similar surge.
Meanwhile, as the colder months set in, Brits also spent more evenings curled up in front of the TV. Demand for hit new shows such as Agatha All Along and Nobody Wants This pushed spending on digital content and subscriptions up 10.0% year-on-year – the highest growth of any single category last quarter. That said, ‘streamflation’ – the rising price of video-on-demand subscriptions – is still an issue for consumers, with 60% saying that they were concerned with the rising costs of these services last month.
"If the recent trend of mood-boosting spending continues into Q4, we can expect the upcoming festive season to be characterised by consumers continuing to treat themselves and their loved ones.”
Karen Johnson, Head of Retail, Barclays
Gearing up the Golden Quarter
As we enter the final three months of the year, Christmas expenses are at the forefront of consumers’ minds, with a quarter of Brits saying they feel this year’s festive period will be more expensive than last year.
In response to rising costs, 15% of consumers in September said they had already started saving for Christmas, with many planning to cut festive expenses by reusing old decorations (33%), watching for holiday deals (26%) and buying gifts early to spread costs (22%).
Encouragingly, our figures show that 57% of Brits are feeling confident about their ability to spend on what matters most to them – the highest level since February. If the recent trend of mood-boosting spending continues into Q4, we can expect the upcoming festive season to be characterised by consumers continuing to treat themselves and their loved ones.
Barclays Market and Customer Insights
Benefiting from access to nearly half of the nation’s credit and debit card transactions, Barclays has unparalleled insight into UK consumer spending. From the wealth of data available to us, we have a clear overview of the trends in consumer behaviour – and the potential to make predictions about what lies in store.
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