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Inflation Hits BOE Target, But Hospitality Hit As Consumers Cut Back

Inflation is acutely hitting Gen X and their confidence to spend, even as other consumers start to feel better off as economic headwinds ease.

A survey of 2,000 consumers conducted on behalf of RSM UK showed that 71% of consumers were curbing spending due to higher prices and cost of goods, but this jumps to 81% of Gen X respondents highlighting the acute squeeze on discretionary spend.

Hospitality and retail will feel the hit as, after energy bills, Gen X plan to cut back on eating and drinking out (39%) and takeaways (33%) closely followed by clothing and groceries at 28% each in the next three months.

In addition, over a quarter (26%) of Gen X don’t feel financially comfortable, up from 17% last year. However, when you compare this with the responses from all consumers, there has been a slight uptick from 47% feeling financially comfortable a year ago, to 49% in 2024 – mirroring the gradual improvement in consumer confidence.

Robyn Duffy, senior analyst at RSM UK:
“Despite the news that inflation is back to the BoE target, consumers still consider higher prices to be the primary factor affecting non-essential spending over the next 12 months. With Gen X particularly feeling the pinch, the hangover from inflation’s peak in 2022 at 11% is likely to persist in the short-term, but sentiment will start to improve as economic stimulus washes through and consumers start to feel better off and ready to spend.

“Until this consumer-led recovery kicks in, the hospitality and retail industries will be hit hardest as eating and drinking out, takeaways and fashion are the easiest things to cut back on, but after a turbulent trading period some consumer businesses will struggle to continue despite the future looking brighter.”