Spend on hospitality robust despite damping confidence in the economy

By Stefan Chomka contact

- Last updated on GMT

Spend on hospitality robust despite damping confidence in the economy

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Consumer spending grew by 3.5% year-on-year in July, the highest figure since April, as the cost of everyday groceries continued to push up spending in supermarkets, according to the latest data from Barclaycard.

However, shoppers reported another month of ‘feeling the squeeze’ of higher inflation and subdued wage growth, dampening confidence in the wider economy.

Consumers received some respite from a continued drop in petrol prices, which have fallen from an average of 120p per litre at the start of the year to 113p last month, says Barclaycard. As a result, expenditure on the forecourt increased just 2.5% in July, the lowest figure since August 2016.

Against this backdrop, consumers carefully budgeted for their priorities. This included the ‘experience economy’, or spending on leisure time with friends and family, as entertainment rose 12.5%. Spending in restaurants and pubs  'remained robust as Brits enjoyed the sunny summer weather', according to research.

As consumers increasingly felt the pressure from months of higher grocery prices and re-allocated their budget to make ends meet, consumer sentiment has also weakened, according to the data. The proportion of those confident in the UK economy fell to 28% in July, the lowest figure recorded since Barclaycard began its research in 2014, and a continuation of the downward trajectory that started in March.

The outlook on spending power has also darkened; confidence in household finances fell to 56% from 69% in June, and the ability to spend more on non-essentials has also declined to 43%, from 56% in June.

Four in 10 consumers (43%) indicate that months of rising prices have led them to change their everyday spending habits. Of these, 54% say that they are shopping at discount stores more often, and 28% are making greater use of vouchers and discount codes.

“Although consumer spending growth rebounded from May and June’s lacklustre performance, last month’s figure should be treated with caution,” says Paul Lockstone, managing director at Barclaycard. “While supermarkets posted a strong performance, some of that growth will be due to higher prices.

“As a result, consumers would have had to budget more carefully to spend on their favourite ‘nice-to-haves’, whether that was a night out at the cinema or a meal with friends and family.

“Months of ‘feeling the squeeze’ have made consumers a little more concerned about the bigger picture. As we head into the remainder of 2017, it will be interesting to see how Brits continue to react to this ‘new normal’.”

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