Consumer card spending grew just 5.9 per cent year-on-year in February, below the latest CPIH inflation rate of 8.8 per cent, owing to a reduction in discretionary purchases amidst the ongoing the cost-of-living squeeze.
Growth rates were also impacted by the lifting of Omicron Plan B restrictions last year, which caused a spike in spending due to pent-up demand, bringing down this year’s figures.
Data from Barclaysreveals that spending on groceries increased just 6.6 per cent in February – well below the latest food price inflation figures – as almost seven in 10 (68 per cent) Brits say they are looking for ways to reduce the cost of their weekly shop.
Pent-up demand for eating and drinking out in February last year, combined with the impact of ongoing inflationary pressures, meant restaurants also saw a decline (-3.0 per cent), while pubs, bars & clubs saw a considerably smaller rise (7.7 per cent) than in January (18.1 per cent) – although it’s worth noting that January’s figures were also inflated by the Plan B restrictions last year.
Brits are also switching up where they shop in order to save money. Of those trying to cut costs, a third (34 per cent) are shopping at multiple supermarkets to source a range of deals, and three in 10 (30 per cent) are shopping in larger supermarkets, because they tend to have lower prices than smaller stores.
Food shortages are also influencing grocery shopping habits, with one in two (51 per cent) Brits noticing that some shelves in supermarkets are considerably emptier than normal. Over a third (35 per cent) has found they are less able to buy the items they need because of these shortages, while a similar proportion (33 per cent) has seen supermarkets restrict the amount of certain items they can buy. Tomatoes (43 per cent), eggs (34 per cent), cucumbers (22 per cent), peppers (19 per cent) and lettuce (16 per cent) are the top items shoppers have seen shortages of recently.
Discretionary Spending Freeze
As households switched on or turned up their heating amidst the cold weather, spending on utilities grew 43.2 per cent, with two thirds (67 per cent) of consumers consciously trying to save energy at home.
In response to rising household bills, nearly six in 10 (58 per cent) are cutting down on discretionary purchases, with spending on non-essential items seeing a markedly smaller year-on-year uplift (5.5 per cent) than in January (10.4 per cent). The slower growth is also because last month’s figures were inflated by Brits having had fewer opportunities for non-essential spending in January 2022, during the Plan B restrictions.
Card spend on clothing (-1.2 per cent) was also impacted by last year’s Omicron guidelines – the category saw a considerable uplift in February 2022 as Brits bought new outfits to celebrate the end of restrictions, which 2023 couldn’t match. In addition, the data shows that 65 per cent of the shoppers who are cutting back on discretionary purchases are reining in spending on new clothing and accessories.
However, as consumers continue to seek out bargains, discount stores were a bright spot, rising slightly faster than in January (5.5 per cent versus 4.2 per cent).
Insperiences also benefitted from the release of new boxsets such as ‘The Last of Us’ and series four of ‘You’, plus blockbuster hit “Black Panther: Wakanda Forever”, which fuelled a 2.2 per cent rise in spending on digital content and subscriptions – the first growth for the category since November 2022.
Super Dupe’r Savings
In an effort to save money, over a third (34 per cent) of consumers are buying ‘dupes’, otherwise known as affordable versions of more expensive, popular products. The most popular items shoppers are buying ‘dupes’ of are food and drink products (68 per cent), clothing (28 per cent) and make-up and beauty products (23 per cent).
The cost-of-living squeeze is set to impact Easter this year, with three in 10 (30 per cent) Brits aiming to reduce their Easter spending due to rising costs. Of those marking the occasion, a quarter (25 per cent) will be spending less on Easter eggs, one in five (22 per cent) is scaling back Easter holiday plans, and 28 per cent intend to spend less on Easter meals out (28 per cent).
Despite this, consumer confidence in household finances remains steady at 64 per cent, while optimism in the future of the UK economy has increased slightly to 24 per cent – up from 21 per cent last month.
Esme Harwood, Director at Barclays, said:
“Several categories saw their growth taper off last month, especially those in the hospitality & leisure sector. This is partly because they couldn’t match the pent-up demand witnessed at the end of last year’s Plan B restrictions, and also due to the ongoing cutbacks brought on by the cost-of-living squeeze.
“The recent fruit and veg shortages are forcing Brits to consider alternatives for their weekly shop, as they continue to look for savvy ways to offset rising food price inflation. Popular trends this month include buying ‘dupes’ of popular products, shopping at discount stores, and limiting Easter spending.”
Silvia Ardagna, Head of European Economics Research at Barclays, said:
“The UK economy flirted with a recession in the second half of last year as real GDP declined in Q3 and was virtually flat in Q4. Persistent elevated inflation continues to take a toll on spending, as indicated by today’s figures, which could prolong the headwinds.
“However, some survey indicators for consumer confidence, and the recent business activity in the manufacturing and services sectors both point to tentative signs of a rebound. The labour market remains tight, with wage growth too strong for the Bank of England to stop hiking. We expect an additional 25bp increase to the Bank rate in March to 4.25 per cent.”