Spending on essentials saw just 1.0 per cent growth – the lowest uplift since April 2020 (-2.9 per cent), largely due to a sharp decline in spend on fuel (-20.1 per cent).
Supermarkets and food and drink specialist stores also saw weaker spending growth (4.5 per cent and 4.9 per cent respectively) compared to July (5.2 per cent and 6.2 per cent respectively). This was impacted by the slower rate of food price inflation**, as well as consumers continuing to find ways to get more value or to reduce the cost of their weekly shop (67 per cent).
Over half (52 per cent) of Brits have noticed that some of the food and drink products they buy have been downgraded in terms of quality or the quantity of premium ingredients, yet still cost the same or more than they used to – otherwise known as “skimpflation”. A fifth also feel takeaways (22 per cent) and restaurant meals (20 per cent) are decreasing in quality without a corresponding fall in price.
While the wetter weather, combined with the slowing rate of inflation, meant spending on non-essential items saw less growth (3.7 per cent) than July (5.6 per cent), there were some bright spots across the retail, hospitality and leisure sectors.
A fifth (19 per cent) of Brits say that, despite the rising cost-of-living, spending on luxury items and/or experiences is still a priority, to maintain their desired lifestyle, with holidays abroad (44 per cent) and hotel stays (22 per cent) cited as the top purchases among this group.
To ensure they can afford to spend on memorable moments, 27 per cent of these shoppers are cutting back on takeaways and fast-food, while a fifth (19 per cent) are reducing costs associated with socialising.
At the same time, over half (52 per cent) of Brits are reining in discretionary spending due to rising household bills, with eating out at restaurants (61 per cent), new clothes and accessories (59 per cent), and ordering takeaways (58 per cent) emerging as the non-essentials most deprioritised.
This comes as takeaways and fast-food recorded a noticeably smaller uplift (6.4 per cent) compared to July (9.2 per cent), while the rainy weather in the first half of August also led to fewer Brits visiting the high-street. Restaurants (-5.8 per cent) fell further into decline from July (-2.5 per cent), while bars, pubs & clubs saw their lowest growth (2.8 per cent) since October 2022.
Spending on airlines (32.1 per cent) and travel agents (3.7 per cent) also remained in growth, yet the uplift was lower than in July (39.1 per cent and 7.8 per cent respectively), as the summer season drew to an end.
Christmas budgeting starts early
As Autumn begins, some Brits are already looking ahead to their Christmas shopping plans. Almost a third (31 per cent) expect this coming Christmas to be more expensive than last year, while a fifth (19 per cent) are worried about being able to keep up with outgoing costs. One in five (17 per cent) savvy savers has also started to put money aside to help fund their festivities.
Despite this, Brits’ confidence in their household finances and ability to live within their means has increased slightly (67 per cent and 72 per cent) compared to July (65 per cent and 70 per cent).
Esme Harwood, Director at Barclays, said:
“The rainy weather impacted high street and hospitality venues in August, but Brits were still keen to spend on memorable summer experiences. The huge Box Office success of ‘Barbie’ and ‘Oppenheimer’ meant entertainment enjoyed another strong month, while holidays abroad boosted international travel and pharmacy, health & beauty stores.
“Shrinkflation – and now “skimpflation” – are increasing concerns for value-seeking shoppers. However, Brits’ confidence in their household finances is unwavering, suggesting they remain resilient in the face of these inflationary pressures.”
Abbas Khan, UK Economist at Barclays, said:
“Muted spending growth in August is in line with other data sources, such as soft PMIs and stalling consumer confidence, suggesting that the bite from monetary tightening is starting to be felt more acutely.
However, with further moderation in inflation and strong wage growth set to support real household disposable incomes, we continue to think the economy will avoid a recession in the coming quarters, even if growth is only set to be sluggish.”
