Consumer spending hit a seven-month high in February as higher wage growth, falling inflation and lower petrol costs gave consumers more money to spend on leisure, travel and restaurants.
Barclaycard’s monthly consumer spending index shows that, following a slight dip at the start of the year, retail consumer spending growth rebounded in February to the 4.1% level seen over the Christmas period.
Record low inflation, higher wage growth, and the falling cost of filling up the car had the combined effect of ‘topping up’ household budgets in February and giving consumers greater propensity to spend, which went on travel, holidays, restaurants and cinema trips.
Encouraged by the record strength of the pound, households put extra budget towards holidaying abroad – in particular during the half term holiday. The number of travel transactions climbed 26%, with travel spending up 8%.
The half-term holidays also saw hotel spending hit a five-month high, up 9.5 per cent on the back of an 11.5% increase in the number of transactions. Airline spending also picked up, growing 3.8% – nearly double the growth seen in January – with transactions up 11.8%.
Airline transaction values were down 7.1% as airlines passed on the effect of lower oil prices, while hotel rooms cost consumers 1.7% less as overcapacity in the package holiday industry saw prices fall.
Where families decided to stay in the UK, they made the most of the time with the kids by eating out more regularly, seeing the latest film releases and taking day trips. Restaurant visits were up a quarter on February last year and cinema visits increased by a tenth, leading to higher spending of 16% and 4.6% respectively. Amusement parks experienced growth of 38%, aquariums 59 per cent and sports centres 20%.
The amount spent per transaction was down however – in restaurants by 6.1% and at cinemas by 4.5%, as families kept their meals to just one course and made the most of cinema ticket offers to stay in budget.
Barclaycard’s data shows that much of the UK’s spend growth is coming from a higher number of smaller value transactions as consumers retain strict budgetary control and cut back the cost of each purchase by shopping around and trading down. The number of purchases made in February was up 8.3% compared to last year, but the average amount spent per purchase was 3.9% lower.
Spend on clothing and at department stores suffered in February after a strong performance last month on the back of the January sales. From an impressive 7.4% in the first month of the year, clothing spending growth slowed to 4.8% in February, whilst department store spending slowed to 4.6% from 5.8% in the previous month. Transaction volumes in both categories continued to grow, but by a third less than in January.
Consumers chose instead to put extra spending into their gardens as spending growth at garden centres hit a ten-month high of 7.9 per cent, while jewellers benefitted from a strong Valentine’s Day and a 7.3 per cent increase in spending on last year.
Each of the twelve UK regions that Barclaycard monitors saw real spend growth, with London seeing the highest growth of 4.8%. Northern Ireland’s growth rate halved to 1.7% from January’s 4.1%. Wales saw the strongest growth in both regional restaurant and hotel spending, at 23% and 17% respectively.
Barclaycard processes over 40% of the 1.04bn retail credit and debit card transactions made in the UK every month, giving it unrivalled insight into how consumers across the country are spending.
Chris Wood, managing director at Barclaycard, said: “A combination of higher wage growth, record-low inflation and an effective fuel-tax cut in the form of lower forecourt prices made February a good month for consumers, with many benefitting from having extra money in their pockets in time for the half-term holidays. Spending was up across the board, but discretionary purchases saw the highest levels of growth and leisure and travel really took off.
“After pausing for breath in January to assess their finances post-Christmas, consumers’ higher disposable incomes and the ingrained frugality stemming from the economic downturn are leading to more frequent, but cheaper, spending trips with overall spending up as a result.”
Category and regional spend growth figures
|Spend growth (year-on-year)|
|Jan 2015||Feb 2015|
|Spend growth (year-on-year)||Transaction volume change||Transaction value change|
|Jan 2015||Feb 2015||Feb 2015||Feb 2015|
|East of England||2.9%||3.5%||7.2%||-3.4%|
All figures are year-on-year changes.