Credit, Collections & Insolvency News
Consumer card spending grew 2.8 % year-on-year in August – noticeably lower than the latest CPIH inflation rate of 6.4 % and July’s growth figure of 4.0 % – as rainy weather cast a cloud on the high street according to new analysis by Barclays
Spending on essentials saw just 1% growth – the lowest uplift since April 2020 (-2.9 %), largely due to a sharp decline in spend on fuel (-20.1 %). Supermarkets and food and drink specialist stores also saw weaker spending growth (4.5 % and 4.9 % respectively) compared to July (5.2 % and 6.2 % 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 %).
The majority of these supermarket savers are buying budget or own-brand goods over branded items, as well as cutting down on luxuries or one-off treats for themselves (both 52 %). A quarter (26 %) are only buying items that are discounted, and 12 % are removing some items when they get to the checkout, to avoid going over budget.
Over half (52 %) 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’. Within this group, the most frequently cited skimpflation examples include crisps (44 %), sweets and chocolate (43 %), and cakes and biscuits (36 %). A fifth also feel takeaways (22 %) and restaurant meals (20 %) are decreasing in quality without a corresponding fall in price.
The impact of ‘skimpflation’ goes beyond food and drink: two fifths (41 %) have noticed that the standards of some of the (non-food) products and services they buy have been downgraded, yet still cost the same or more. These shoppers are most noticing the declining quality of clothing, chosen by 44 %, closely followed by toilet paper (43 %), and toiletries/cosmetics (37 %).
In addition, ‘Shrinkflation’ continues to be front of mind for the majority of shoppers (84 %), with chocolate (54 %), crisps (47 %) and packs of biscuits (43 %) remaining the top products identified as being impacted by this ongoing trend.
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.”