Consumer spending growth slowed to 2.8 % in May despite Brits continuing to spend on the experience economy as overall confidence in household spending power cooled in April.
Data from Barclaycard, which sees nearly half of the nation’s credit and debit card transactions, revealed lower levels of growth across everyday essentials (3.1%) when compared with the Easter-driven increase of 11.4 % in April.
Paul Lockstone, managing director at Barclaycard, comments: “Consumer spending growth was subdued last month as shoppers paused for breath after an Easter bounce in April. With CPI running at its highest rate since 2013, it’s no surprise that more of us are starting to ‘feel the squeeze’ of inflation and slower wage growth, perhaps prompting small changes to our spending patterns.”
Consumers’ confidence in their ability to spend on non-essentials also dipped a further 2 percentage points in May to 4%, with a slim majority (52%) of Brits saying they are ‘feeling the squeeze’ due to a combination of inflation and subdued wage growth.
Of these, 69% say the sentiment is because their weekly shop is more expensive than it used to be, and another three in 10 (31%) say it is because of increased fuel prices – highlighting the impact of rising prices on groceries and essentials more broadly.
However, despite an overall dip in consumer spending Close Brother Retail Fiance reports an increase in the sale of watches and jewellery throughout May.
Alex Marsh, Managing Director at Close Brothers Retail Finance, comments: “After positive April figures, retailers are on the back foot once again dealing with the effects of inflation as it takes its toll on consumer spending. Despite the disappointing overall sales figures, some sectors benefitted from an uplift in spend in May, with garden and outdoor sports equipment continuing to grow as the weather improved. Jewellery and watch sales also increased in May and furniture was a winner over the first May bank holiday weekend. The second May bank holiday, however, saw the lowest level of spending in the month as people made the most of the sunny weather and half term, and held off from big tickets purchases ahead of pay day.”
He adds: “It could be a challenging summer for retailers as inflationary pressures and wage growth stagnation continue to have a knock on effect on consumer spending. They must make sure they are in good shape to tackle the effects of this subdued spending and give consumers the chance to buy big tickets summer items through flexible payment methods.”