A warm September proved a hit for pub and restaurant spend (up 17.3 per cent and 14.9 per cent respectively) but it dampened demand for clothing (-1.8 per cent) and in department stores (-4.6 per cent)
Almost half (48 per cent) of consumers are now confident in the UK economy, the highest level since Barclaycard began monitoring it in 2014, up from 34 per cent before the EU Referendum vote in June
Consumer spending maintained an upward trajectory in the third quarter of the year, recording growth of 3.6 per cent – up from 2.8 per cent and 3.1 per cent in the first and second quarters of 2016.
Data from Barclaycard, which processes nearly half of the nation’s credit and debit card transactions, shows consumers spent 4.2 per cent more in September 2016 than the same month last year. This made it the joint-strongest month for growth this year following the same increase in August, after muted 2.6 per cent growth seen in July.
Consumer confidence in the UK economy meanwhile has reached the highest level since Barclaycard began tracking it in 2014, with 48 per cent of people now saying they feel upbeat about the UK economy, a rise from just 34 per cent who felt the same before the EU Referendum vote in June. More consumers now feel confident about the UK Economy than those that don’t – in the first two quarters of the year pessimists outweighed optimists by almost two to one.
The unseasonably warm weather in September boosted spending on experiences significantly. Cinemas performed particularly strongly, seeing a 15.2 per cent rise as the highly awaited releases of Bridget Jones’ Baby and The Magnificent Seven hit UK screens. Consumers took advantage of the warmest starts to autumn in 100 years and splashed out in pubs (17.3 per cent increase) and restaurants (14.9 per cent), pushing up spending growth in both to a 20- and 15-month high respectively.
Q3 2016 Consumer spending chart
Consumers cut back on the high street, however, leading to spending on clothing and department stores dropping by over 4.5 percentage points from August, and entering negative territory at -1.8 per cent and -4.6 per cent respectively. Nearly one in four (23 per cent) consumers said the warm weather dissuaded them from updating their autumn wardrobe.
Mixed fortunes are set to continue for high street retailers as consumers plan for the festive season. While the majority of consumers (57 per cent) expect to spend money during the Black Friday/Cyber Monday sales period – most likely on new clothes (41 per cent), smartphones/tablets (33 per cent) and videogames/CDs (32 per cent) – many are planning a more modest Christmas, with four in 10 (39 per cent) saying they plan to spend less than last year.
This comes despite consumer sentiment improving since the EU Referendum vote in June. In addition to higher levels of confidence in the UK economy, 70 per cent of consumers feel more secure about their household finances – up 4 per cent from Q2. And consumers’ confidence in their ability to spend more on non-essential items, and to make a major purchase, both jumped by 5 percentage points (to 56 per cent and 40 per cent) from record low figures in Q2.
Paul Lockstone, Managing Director at Barclaycard, said:
“For the first time since Barclaycard began tracking consumer confidence in 2014, more people now tell us they feel confident about the UK economy than those who don’t, and the proportion has jumped since the EU Referendum vote in June.
“This recovery in confidence, combined with the warmer September weather, helped to prolong the summer feeling amongst consumers last month. Increased spend on experiences, and in particular with friends and family in pubs and restaurants, delivered one of the strongest months for spend growth so far this year.”