Card spending growth slows to three-year low, yet consumer confidence is boosted by falling inflation

• May’s 1.0 per cent growth in overall spending is the smallest since February 2021, as Brits cut back on discretionary purchases due to rising household bills and wet weather
  
• Supermarket spend saw its lowest growth since June 2022, while takeaways and fast food fell for the first time in four years
• Encouragingly, spending on utilities fell -12.5 per cent, in line with the April Ofgem price cap decrease
• The recent drop in inflation is also having a positive impact on consumers’ confidence in household finances and ability to live within their means
• The Barclays Consumer Spend report combines hundreds of millions of customer transactions with consumer research to provide an in-depth view of UK spending

Consumer card spending grew just 1.0 per cent year-on-year in May, the smallest rise since February 2021 and significantly lower than the latest CPIH inflation rate of 3.0 per cent. Resilient categories such as airlines and takeaways were knocked by rising household bills, while wet weather continued to cast a cloud over the high street. However, consumers are feeling optimistic about the latest inflation figures, with three in 10 (28 per cent) planning to spend more when the weather improves.

April’s price hikes on certain essentials and household bills – including council tax and broadband – have started to impact consumer confidence. The vast majority (87 per cent) are worried about the impact of rising household bills on their personal finances, with increasing council tax (80 per cent), broadband and mobile costs (79 per cent), water bills (76 per cent), and dental costs (75 per cent) among the top concerns. This is likely one of the reasons why spending on non-essential items saw its smallest increase (0.7 per cent) since February 2021. However, encouragingly, spending on utilities was down -12.5 per cent, thanks to the April Ofgem price cap decrease.

Fast food falls out of favour

Brits reined in spending on takeaways and fast food in May, with the category recording its first decline (-0.2 per cent) since May 2020. This comes as 44 per cent say they are reducing their discretionary spending, citing ordering takeaways (54 per cent) as their number one cutback.

Over half (53 per cent) of these consumers are also cutting back on eating out at restaurants, with spending in this category seeing an even greater decline in May (-15.7 per cent) than in April (-13.1 per cent).

Travel, another of the UK’s typically more resilient sectors, also had a challenging month. Airlines saw their smallest uplift (5.6 per cent) since July 2021, while spend growth at travel agents was as its lowest level (4.3 per cent) since August 2023. Similarly Entertainment spending, typically boosted by the release of summer blockbusters, saw only a modest 3.0 per cent increase. This comes as three in 10 (30 per cent) Brits say they plan to go to the cinema less often, because this summer’s blockbusters are less exciting than they have been in previous years.

On a more positive note, almost three in 10 (28 per cent) Brits say they will spend more when the weather improves this summer – a figure which rises to 39 per cent for 18 to 34 year-olds. Two fifths (39 per cent) of this group plan to spend more on food and drink for picnics, a third (34 per cent) say they’ll fork out on drinking and dining al fresco at pubs and restaurants, and 29 per cent intend to buy barbeque supplies to host friends and family in the coming months.

Rainy May dampens retail sales

As the rain continued to cast a cloud over the high street, overall retail spending fell -0.4 per cent – the biggest drop since September 2022 – with in-store spending (excluding groceries) and clothing sales dropping by -2.6 per cent and -1.0 per cent respectively.

This comes as over half (52 per cent) of the consumers who are reducing their discretionary spending say they are limiting purchases of new clothes and accessories. Over two fifths (41 per cent) plan to re-wear more of their old summer clothes this year and 29 per cent are cutting back on shopping for their summer wardrobe due to cost-of-living concerns.

Spending at supermarkets grew just 0.3 per cent – the lowest growth since June 2022 – as April saw food price inflation fall to its lowest annual rate (2.9 per cent) since 2021. The downturn in supermarket shopping is also partly due to the comparison with May 2023, when spending on groceries surged due to Coronation bank holiday street parties and soaring food price inflation.

However, pharmacy, health and beauty stores continued to defy this trend, rising 5.0 per cent, owing to several factors including the “lipstick effect”, a growing interest in personal wellness, and the influence of viral makeup and skincare videos.

Home improvement receives bank holiday boost

Some categories, though still in decline, showed signs of recovery last month. Furniture stores saw their smallest decrease (-2.3 per cent) since last August, while home improvement and DIY stores (-5.4 per cent) had their best performance since last September, likely boosted by homeowners capitalising on the early May bank holiday to spruce up their living spaces. A fifth (18 per cent) of the Brits who plan to spend more when the weather warms up this summer cited that they want to invest in home improvements and renovations.

In addition, news that UK inflation has fallen to its lowest level in almost three years has eased consumer concerns. Despite some household bills rising in recent months, six in 10 Brits (62 per cent) say the inflation announcement has made them confident in their ability to live within their means each month, and a similar proportion (56 per cent) say it has made them confident in their household finances.

Karen Johnson, Head of Retail at Barclays, said: “Retailers faced a challenging May, yet the few sunnier days in the month did bring a welcome uptick in footfall. As consumers gear up to spend more with better weather, and with the Euros, Wimbledon, and Taylor Swift's 'Eras Tour' on the horizon, there's a brighter outlook for the coming months.”

Jack Meaning, Chief UK Economist at Barclays, said: ”The economic strength we saw in the first three months of the year was always expected to ease as we moved into the second quarter, with GDP having seen the extra bounce needed to recover the ground lost in last year’s recession. 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.”

Overall growth figures

Notes to editors

Established in 2014, Barclays issues a monthly press release commenting on consumer spending trends.

Across its issuing and acquiring businesses, Barclays sees nearly 40 per cent of the nation’s credit and debit card transactions, which provides us with unique insight into UK consumer spending. This press release is based on consumer card spending data from Barclays’ issuing business – i.e. Barclays debit card and Barclaycard credit card transactions. It relates to the period April 22nd 2023 – 19th May 2023 vs April 20th 2024 – 17th May 2024.

The Barclays Consumer Spend research in this press release was carried out between 17^th May and 21^st May 2024, and also between 24^th and 28^th May 2024 by Opinium Research on behalf of Barclays. There were 2,000 respondents in each round of research, providing a representative sample of UK consumers by age, gender, region, and income group.

For more information, please contact Dee Fallon at deirdre.fallon@barclays.com

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About Barclays Market and Customer Insights

Barclays Market and Customer Insights helps businesses keep up to date with spending trends, monitors their market position and enhances their understanding of customer behaviour, based on actual customer spending. For further information, please email contact-MCI@barclays.com.