British consumers cut back sharply on spending last month in almost all areas apart from holidays as the rising cost of living hit budgets hard, according to industry data.
Households adopted a more frugal approach in May with inflation running at its fastest annual pace in 40 years, stoked by a 54 per cent jump in the cost of average gas and electricity bills a month earlier.
Retail sales fell at an annual rate of 1.1 per cent in May, a sharper contraction than the 0.3 per cent fall in the previous month and the worst since January last year, according to figures compiled by advisory firm KPMG and the British Retail Consortium trade association.
BRC chief executive Helen Dickinson said sales continued to see declines “as the cost of living crunch squeezed consumer demand”. She noted that higher-value items, such as furniture and electronics, had taken the biggest hit as shoppers reconsidered major purchases during this difficult time.
The BRC warned that sales figures were not adjusted for inflation, meaning that the drop in sales “masked a much larger drop in volumes once inflation is accounted for”.
Separate consumer spending data tracked by Barclaycard, the payments company, which monitors almost half of all UK credit and debit card transactions, also showed households tightening their belts across the board last month.
Britons reined in their spending on eating and drinking out, with expenditure on restaurants down 5.9 per cent from May last year. It also fell month on month on April, Barclaycard said, without specifying the scale of the decline. There was a similar fall in spending in bars, pubs and clubs alongside a 5.7 per cent drop in digital subscriptions, such as Netflix, from a year earlier.
The Barclaycard data, which similarly are not adjusted for inflation, supported the BRC’s findings that people were cutting back on bigger-ticket items, with spending in furniture stores down 3 per cent month on month.
In contrast, the travel sector showed strong year-on-year growth, driven by consumers making the most of the easing of Covid-19 restrictions. Spending rose almost 180 per cent compared with the same time last year and was also up on April.
Travel agents enjoyed a sizeable uplift of 24.2 per cent on the previous month, while spending on direct bookings with airlines rose 6.6 per cent, as more holidaymakers booked trips abroad. Spending at UK hotels, resorts and other accommodation rose by 1 per cent month on month.
Surging energy bills drove up spending on utilities per customer by 34.5 per cent in May compared with the same period in 2021.
“The cost of living squeeze is clearly influencing discretionary spending habits, with figures showing a decline in subscriptions, and a drop in spending at restaurants, bars, pubs and clubs,” said José Carvalho, head of consumer products at Barclaycard.
Separate data from the BRC also suggested that the platinum jubilee bank holiday weekend could provide a boost to spending in early June, with UK footfall for the whole of last week up by 17 per cent compared with the average for May.
Source: Economy - ft.com
