Consumers have been treating the January blues with a strong dose of retail therapy, increasing their spending in all major categories from clothing to household goods. Recent negative news about the global, European and UK economies has led to a sharp deterioration in confidence, however, which may cause shoppers to take a more cautious approach to spending over the coming months.
Consumer spending grew 3.8% year-on-year in January, according to the latest data from Barclaycard, which processes nearly half of all credit and debit card transactions in the UK. The increase continues the strong run of growth in 2015, which saw average growth of 3.9% as merchants slashed prices during the traditional sale period.
Shoppers splashed out on major purchases, with spending in department stores and furniture shops both recording their highest increase since Barclaycard’s spending records began, growing 12.6% and 11.3% respectively. They also bought winter wear as the weather finally turned colder which, coupled with the January sales, resulted in a 6.7% uptick on clothing spend.
The trend to spend comes despite a string of negative economic news – including a slowdown in China, record-low commodity prices and weaker prospects of growth at home – which has affected consumer confidence.
Barclaycard research shows that consumer sentiment has fallen sharply this year, with the proportion of people who expect the global economy to deteriorate over the next three months surging from two in 10 (22%) in December to four in ten (42%) in January. Similarly, three in 10 (29%) now expect to see a decline in the UK economy in the next three months – up significantly from just 18% in December.
As a result, consumers are more pessimistic about their own situation. Those who ‘feel more confident about their personal finances now compared to a few months ago’ have dropped 10 percentage points from December to January (34% to 24%) and just 45% of people feel confident in their job security, down from 52% in December and the lowest since Barclaycard’s consumer confidence research began.
The findings suggest 2016 will see consumers continue to adopt a cautious approach to spending. Where a third of consumers (34 %) expected to ‘splash out on at least one major item’ in 2016 when asked in December, that figure has dropped to under a quarter (23%) in January.
Despite concerns over the economy, however, results show that some shoppers still intend to find a way to purchase the ‘nice-to-haves’, regardless of how the economy fares in 2016, with four in 10 (40%) still expecting to treat themselves or their family this year.
Paul Lockstone, managing director at Barclaycard, said: “January spending provided a welcome boost to retail sales with consumers taking advantage of steep discounts in the post-Christmas period to buy big-ticket items such as furniture or white goods. The arrival of colder weather, after an unseasonably warm start to the winter, also gave a boost to clothing stores as consumers finally updated their wardrobes.
“It seems the downbeat news about the economy is taking a toll on consumer sentiment, however, with many shoppers reporting that they are less confident about the economy and, as a result, about their own financial prospects. Consumers will continue to place value for money front and centre when making purchasing decisions – they are willing to spend, but on their own terms.”