UK consumer spending increased last month but lagged far behind inflation, according to data published on Tuesday, as households continued to cut back on purchases in the face of high energy bills and other cost pressures.
Figures from Barclays, which represent almost half of credit and debit card transactions nationwide, showed that card spending rose 4 per cent year on year in March.
According to the bank’s consumer spending index, sales of household and DIY goods increased, as people began to renovate their homes ahead of summer. The latest season premieres of popular television shows also fuelled a rise in subscription purchases.
But the 4 per cent increase continued to be outpaced by stubbornly high consumer price inflation, which unexpectedly rose at an annual rate of 10.4 per cent in February, suggesting cuts to real-terms spending by squeezed households.
“The below-inflation rise in grocery spending shows that Brits are still trying their hardest to shave money off their weekly shop, as energy bills continue to rise”, said Esme Harwood, director at Barclays.
In the spring Budget, chancellor Jeremy Hunt said the government would extend its energy price guarantee for households by three months to June. The cap — which took effect after the surge in wholesale gas and electricity prices sparked by the Ukraine war — has limited average annual energy bills to £2,500 this winter.
Nevertheless, 88 per cent of people surveyed by Barclays said they were concerned about the impact of energy bills on their finances. As cold weather in March prompted people to keep the heating on, high bills left them with less to spend on non-essentials.
Of all survey respondents, almost two-thirds said they were buying fewer clothes. Meanwhile, 62 per cent of respondents said they had cut down on eating out to save money, with restaurants reporting a 5.6 per cent year-on-year drop in customer spending.
Silvia Ardagna, head of European economics research at Barclays, said that “with food and beverage prices up notably in February, and driving the sharp acceleration in prices set by restaurants and hotels . . . it is not surprising that consumers are moderating spending”.
According to data published last month by the Office for National Statistics, prices of food and non-alcoholic drinks rose 18.2 per cent, the highest pace in more than 45 years, as soaring energy costs and bad weather across parts of Europe led to shortages and rationing.
Separate figures released on Tuesday by the British Retail Consortium, a trade body, showed the value of total sales for its members — mostly big supermarkets and chains — rose 5.1 per cent year on year in March.
“As consumers cut back on eating out, spending on home comforts, accessories and furniture saw the biggest growth, with people looking to entertain at home instead,” said Paul Martin, UK head of retail at KPMG, an advisory firm.
Source: Economy - ft.com
