Great British getaway drives increase in consumer spending in July, Barclaycard reports

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Consumer spending grew 3.5% year-on-year in July, as households spent more on holidays and entertainment and updated their summer wardrobes, according to the latest monthly update from Barclaycard, which processes nearly half of all the UK’s debit and credit card transactions.

Driven by an 8% increase in spending on travel and entertainment as consumers spent on family holidays, days out, cinema trips and restaurant meals, July was the fourth month in a row of positive real spend growth.

After years of cutting back their spending on discretionary items in the face of a prolonged economic downturn, consumers spent considerably more on travel in July – including 8% more on hotels, 4% more at travel agents and, after months of cutting back, 2% more on airline tickets.

Fast food outlets, bowling alleys, restaurants and tourist attractions also saw strong levels of growth – 31%, 23%, 16% and 8% respectively – as families celebrated summer with extra days out.

New research by Barclaycard into the nation’s confidence found that this uplift in spend has been prompted by improved confidence in their finances; over half (55%) of consumers said they feel ‘confident about their personal financial situation’ and believe that it ‘will improve over the coming twelve months’; 70% feel confident about living within their means; and nearly one in five said they are planning on spending more on holidays over the next year (19%).

Department store spending rebounded and clothing spending posted another strong performance as retailers benefited from the knock-on effect of families kitting out the kids in summer clothes and stocking the suitcase for their holiday.

From a fall of 2% in June, department store spend grew 7.3% year-on-year in July – its second best performance of the year; children and infant clothing spend was 28% and family clothing spend was 12% higher.

Despite increasing confidence, spending on everyday essentials remains squeezed as consumers have become accustomed to a “new normal” – closely monitoring their expenditure and looking for ways to make their money go further.

Supermarket spending grew just 0.5% as consumers continued to switch to cheaper alternatives for their grocery shopping, and petrol spending fell by 5.1% as use of the car made way for cheaper public transport, which grew 8.6 per cent.

The research by Barclaycard found that almost six in ten people asked (59%) believe petrol and groceries will see the biggest jump in costs between now and the next three months. Just under half (49%) expect the cost of living to rise, and major household bills to either remain the same or rise, in the coming twelve months.

Chris Wood, managing director, Barclaycard, said: “As official figures show that the UK economy has finally recovered to its pre-crisis size, the growth in spending in July is a big boost for retailers after months of lacklustre performance.

“The extra spending on travel and entertainment was not only beneficial to businesses in those sectors but led to strong increases in spending on clothing and at department stores, creating a positive knock-on effect on the wider high street.

“Though it’s still early days, with half of UK consumers saying that they are confident about their personal financial situation, we could well be seeing the start of a spending recovery.”