Card Spending Returns To Growth Giving Economic Boost

• Grocery spending saw its highest uplift since March, fuelled by a surge in shopping for picnic and barbecue foods at specialist stores.

• Almost half of Brits are buying affordable luxuries even when trying to make cutbacks, especially confectionery and cosmetics.

• Garden centres benefitted as the UK basked in sunshine, and the retail sector returned to growth for the first time since March.

• Consumer confidence in household finances jumped five percentage points, yet one in five are concerned about keeping up with rising costs this Christmas.

• ‘Double-dip shrinkflation’ has emerged where products go through multiple size reductions without a price cut.

• The Barclays Consumer Spend report combines hundreds of millions of customer transactions with consumer research to provide an in-depth view of UK spending.

  
  

Consumer card spending returned to growth in August, rising 1.0 per cent year-on-year following two consecutive months of decline, although it remained below the latest CPIH inflation rate of 3.1 per cent. Non-essential spending also bounced back (up 0.7 per cent) thanks to the late arrival of barbecue and picnic weather propping up butchers, delicatessens and garden centres. Meanwhile, nearly half of Brits report treating themselves to affordable, mood-boosting luxuries, such as pastries and cosmetics, even while tightening budgets.

Spending on groceries (up 1.9 per cent) saw its largest uplift since March this year (2.7 per cent), fuelled by robust growth at food and drink specialist stores – such as butchers and delicatessens – which saw their largest increase (5.1 per cent) since January 2024 (5.2 per cent), thanks to Brits enjoying barbecues and picnics outdoors in the sunshine.

Supermarkets (up 1.5 per cent) also saw their highest growth since March this year (2.8 per cent), in part reflecting a shift towards healthier home cooking. Nearly half (45 per cent) of Brits say they are prioritising buying raw or whole-food ingredients to prepare fresh meals and snacks, in order to avoid ultra-high-processed foods.

The Sweet Treat Economy

Almost half (47 per cent) of consumers say that they continue to spend on small, luxury purchases that bring them joy, even when trying to make cutbacks. Sweet treats, such baked goods, are the most popular type of pick-me-up that these joy-seekers prioritise (45 per cent), perhaps influenced by the rise of viral sensations like the ‘crookie’ and the ‘Dubai chocolate bar’ on social media.

Demand for little luxuries also bolstered pharmacy, health and beauty retailers, with the category enjoying yet another month of growth (7.3 per cent) – the highest since January 2023 (10.2 per cent) – reflecting the long-running trend of shoppers prioritising cosmetics even as budgets tighten, often referred to as the ‘lipstick effect’.

Double-Dip Shrinkflation

Concerns related to shrinkflation – i.e. products getting smaller but costing the same – remained stable in August, with eight in 10 reporting that this trend is having a negative impact on their household finances.

A quarter (26 per cent) have also started to spot ‘double-dip shrinkflation’, where products go through two or more rounds of size reductions, without a corresponding reduction in price. The top five most frequently cited products hit by ‘double-dip shrinkflation’, according to this group, are chocolate (57 per cent), crisps (44 per cent), packs of biscuits (41 per cent), snack bars (36 per cent) and sweets (36 per cent).

Retail Sector Shows Green Shoots

The retail sector (up 0.1 per cent) returned to growth for the first time since March this year, while brick-and-mortar businesses witnessed the ongoing resurgence of in-store shopping. The recent heatwave contributed to a return to the high street, with 55.7 per cent of all credit and debit card spending in August conducted face-to-face (as opposed to online) – the highest level so far this year.

The retail sector also benefitted from an 8.0 per cent increase in spending at garden centres – the category’s largest uplift so far in 2024 – as the drier and hotter weather across large parts of the UK encouraged Brits to invest more time and money sprucing up their outdoor spaces.

However, the sunshine has not had as much of an impact on clothing retailers, which saw only a mild improvement, declining by a marginal -1.7 per cent compared to -2.3 per cent in July. Clothing remains one of the most common areas where discretionary spending is reined in – of the 46 per cent of Brits who say they’re planning to make cutbacks, 53 per cent say they’ll spend less on clothing and accessories.

Cut-Price Travel Deals Snapped Up

The travel sector (up 6.8 per cent) had a particularly strong month, following news that several low-cost airlines have been offering last-minute holiday deals in order to tempt Brits abroad. Travel agents (up 7.2 per cent) and airlines (up 8.3 per cent) both had strong months, seeing their highest growth since February and March respectively.

Consumer Confidence Climbs Despite Christmas Cost Concerns

Looking ahead to the upcoming festive season, over a third of Brits (35 per cent) anticipate that this Christmas will be more expensive than last year, and one in five (19 per cent) is worried about how they’ll keep up with those rising costs. Meanwhile, a quarter (24 per cent) are concerned that shrinkflation will mean they get less value for money on their festive spending.

That said, the summer spirit has arrived for the vast majority – Brits are feeling noticeably more confident in both their household finances (70 per cent) and ability to live within their means (73 per cent), compared to last month (65 per cent and 70 per cent respectively).

Karen Johnson, Head of Retail at Barclays, said:

“The long-awaited British summer has unlocked pent-up demand across a number of retail categories, such as garden centres and butchers, as many Brits dusted off their barbecue for the first time this year."

“We’re also seeing an emerging trend of consumers indulging in retail therapy for mood-boosting pick-me-ups, often in the form of sweet treats and cosmetics. This is a much more immediate version of the long-running trend of consumers making room in their budgets for memorable experiences, like tickets for next year’s Oasis tour, which went on sale over the weekend."

“While cost-conscious shoppers continue to rein in discretionary spending to account for rising prices, especially in the run-up to Christmas, it’s encouraging to see that Brits are feeling noticeably more confident in their personal finances – a strong indicator of future spending as we approach the crucial festive period.”

Jack Meaning, Chief UK Economist at Barclays, said:

“Having seen government spending drive the economy in the second quarter, and private consumption relatively muted, this data very much supports our view that the balance will shift over the second half of the year and into next. Growing real incomes and strengthening consumer confidence should combine with falling interest rates to increasingly allow consumers to put their spending power to work.”