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Consumer spending up 3.9% in January

Barclaycard

Consumer spending performed robustly in January, growing 3.9 per cent year on year, partially driven by price increases that continued to drive uplifts in ‘essential’ spending, such as the weekly supermarket shop.

Here's the monthly summary:-

  • Consumer spending grew 3.9 per cent year-on-year in January, driven by a 4.1 per cent increase in spending on everyday essentials, with rising prices leading to a strong uplift in supermarket expenditure  
  • Spending growth on non-essentials was 3.8%, down from 4.2 per cent in December, with clothing and travel recording weaker growth than the month prior
  • Entertainment remained a bright spot, driven by double digit growth in pubs (12.8 per cent) and restaurants (10.5 per cent), as Brits cured the January blues with meals and evenings out with family and friends
  • Consumers’ confidence in the UK economy fell to 29 per cent – the second lowest level seen in the past 12 months

Data from Barclaycard, which processes nearly half of the nation’s credit and debit card transactions, shows that spending on day-to-day necessities surpassed 4 per cent for the first time in seven months as inflationary pressures fuelled a strong start to the year.

This was driven by a similar seven-month-high increase for supermarket spend, which rose 4.4 per cent year-on-year.  In contrast, growth in discretionary categories slowed, falling to 3.8 per cent as consumers pared back on ‘nice-to-have’ items to balance the books.

Spending on clothing (1.6 per cent) and travel (4.5 per cent) saw weaker growth, especially when compared with December figures of 4.1 per cent and 7.3 per cent respectively. This suggests that, for many consumers, this year’s January sales proved to be less of a lure than the increasingly popular Black Friday and pre-Christmas discounting period.

The ‘experience economy’ remained a bright spot, as Brits continued to prioritise leisure activities. Entertainment spend recorded growth of 9.4 per cent, as consumers splashed out in pubs (12.8 per cent) and restaurants (10.5 per cent) to help cure the ‘January blues’.

Yet despite this increased propensity to spend on social occasions, concerns around the wider economic picture are evident. In the wake of a broadly positive December, when six in 10 Brits expressed confidence in their household finances, just 54 per cent now say the same. Confidence in the UK economy is also deteriorating; just 29 per cent of consumers say they feel confident. At the same time, almost half (46 per cent) of Britons worry that the ongoing Brexit talks will leave them worse off. The gap between those confident in the UK economy and those not confident has steadily widened on average since September 2017.

There is evidence, too, of a future fall in perceived spending power as a result of inflationary pressures. More than half (54 per cent) of Brits say that additional rises in supermarket prices would force them to cut back on spending, with 29 per cent saying the same about rising fuel prices, and one in eight (13 per cent) saying they would cut back amid news of job losses or business uncertainty in the UK.

Paul Lockstone, Managing Director at Barclaycard, said:

“January’s uplift in spending represents a strong start to the year. But faltering confidence levels across the board suggests that consumers are feeling the effects of a post-Christmas slump, as well as the wider impact of inflation, on their everyday lives. 

“While spending on the ‘experience economy’ proved to be a natural and welcome antidote to the January blues, the dip in sentiment revealed by our consumer confidence data, allied to concerns over economic and political uncertainty, is quite telling. It suggests that caution will continue to be the watchword for many consumers as they allocate their household budgets in the months ahead.”

Source: Insight DIY Team & Barclaycard Press Release

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06 February 2018

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Thank you for the excellent presentation that you gave at Woodbury Park on Thursday morning. It was very interesting and thought-provoking for our Retail members. The feedback has been excellent.

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Martin Elliott. Chief Executive - Home Hardware.
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