Consumer spending grew just 5.9 per cent in February

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 according to latest data from Barclays.

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.

The data reveals 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.

Almost half of these shoppers are cutting down on luxuries or one-off treats for themselves (49 per cent), while a similar proportion are buying more budget / value ranges (48 per cent) and making a shopping list so they only buy what they need (46 per cent).

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.

Spend on fuel increased just 5.0 per cent year-on-year – likely due to falling petrol and diesel prices, as well as the uplift in car travel seen in February 2022, brought on by the easing of Covid restrictions and the end of work-from-home guidance. Meanwhile, spending on public transport saw a sizeable uplift (22.6 per cent), as commuters locked in fares ahead of the recent 5.9 per cent increase in train ticket prices, which came into effect on 5 March.

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.

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.

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)..

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.”