Consumer spending grew 4.2 % year-on-year in August – its second highest level so far this year – as households spent more on clothing, entertainment and travel, according to monthly data from Barclaycard, which processes nearly half of all the UK’s debit and credit card transactions.
Following marginal spending increases earlier in the year, consumer spending grew strongly in August as households increased their discretionary spending, updated their wardrobes and treated themselves and the family.
As data showed that consumer confidence reached a nine year high in August, Barclaycard saw year-on-year increases in spending on entertainment of 13.4% in August; 9.6% on clothing; and 5.3% on travel. Spend to date in 2014 is now up by 2.9% – an encouraging figure, although still lagging 2013’s full-year increase of 3.2%.
With London Fashion Week underway, clothing retailers – who have benefitted from the sector’s particularly strong performance this year – will be hanging their hopes on the catwalk shows to inspire customers to keep updating their wardrobes. Women’s clothing has seen spend grow by an average of 8.8% a month so far this year, with it rising 9.2% in August, whilst shoe shops have seen average growth of 9.8% a month.
Family clothing, which includes spending at retailers that cater for the entire household, and accounts for nearly two-thirds of all clothing spend, has been the key driver with growth consistently up by double-digits this year and averaging 15% a month compared to 2013.
As parents turned their attentions to kitting the kids out for the new school year, it was family clothing that grew most strongly last month, up 15.2% on last year. This was driven by child and infant clothing (up 25%) and spending on school uniforms which, although only accounting for a small proportion of spending, was up 39%.
The average amount spent per clothing transaction is down 1.2% this year compared to last, implying that retailers have responded to years of stagnant growth by reducing prices and prolonging sales.
Men’s clothing spending has fallen even further – with average spend down 8.7% over the year – as merchants look to combat the some of the impact of the categories flat performance over the past eight months (spending is up just 0.4%).
Department stores in particular have benefitted from the big increases in family clothing spending, up 6.0% in August, whilst supermarket spending, which has continued to struggle this year, was up 2.9 per cent in August as families took advantage of the value of their school uniform ranges.
Online retailers have benefited the most from the boom – clothing spend online has been growing by an average of 30% a month when compared to last year, whereas in-store clothing spending has seen growth of just over 4% (in the first six months of the year).
The latest estimate of the UK’s GDP last month confirmed that the UK economy grew by 0.8% in the second quarter of the year and that output was back above pre-crisis levels. Signs that the economic recovery is filtering down to households continue to surface in other economic indices – consumer confidence strengthened in August, returning to positive territory and matching the nine-year high seen in June.
The search for greater value is likely to be helping drive online spend too, as it again saw double-digit growth in August, up 10.4%. And though the trend continues to be ‘from bricks to clicks’, in-store spending improved slightly in August – growing 2.6% – thanks to families ‘hitting the high street’ more often over the summer holiday period.
Chris Wood, managing director, Barclaycard, said: “Consumer spending in August was amongst the strongest we’ve seen so far this year, with positive economic indicators such as GDP growth, falling inflation and rising employment encouraging consumers to loosen their purse-strings. Spending was up both overall and on the things on which they have recently cut back – clothing, entertainment and travel.
“While the increase in spend in August is certainly encouraging, households continue to be cautious in their approach to spend, being reluctant to give up the hard-won benefits of the fiscal prudence they adopted during the economic downturn. We believe that this ‘new normal’ – fiscal responsibility, coupled with a ceaseless search for value for money – is here to stay.
“With the summer months traditionally strong for discretionary spend, we need to see the August rebound continue for a little longer before we can be sure we have truly turned the corner.”
Growth in spending by category in the 12 months to the end of August by category
|Books, Newspapers & Magazines||10.5%||17.3%||-1.9%|
|Auto Parts & Accessories||7.1%||54.6%||-0.8%|
|Cinema, Theatre & Dance||6.1%||10.9%||1.1%|
Overall growth in spending in the 12 months to the end of August by region