Consumer spending growth slowed slightly to 2.6% in July, despite Brits continuing to spend in restaurants, pubs and cinemas, as overall confidence cooled in response to economic and political uncertainty.
The July spending figure was a dip after two months of buoyant growth seen in both May and June, despite being lifted by a double digit increase of 10.7% in entertainment spend.
According to Barclaycard, which processes nearly half of all the nation’s credit and debit card transactions, spending in pubs rose 12.2% and restaurants fared even better, up 12.8%, as consumers took advantage of the warmer weather to enjoy time out with friends and family.
Cinema spend also performed strongly, rebounding from negative territory in June (-1.6%), to jump 10.1% as a number of highly anticipated films hit screens in July, including Absolutely Fabulous: The Movie and Ghostbusters.
The continuing growth of these categories suggests that many consumers took a ‘business as usual’ approach to their spending in the month following the UK’s decision to leave the EU. According to Barclaycard’s latest consumer confidence research, six in 10 (63%) said they have carried on spending as they did before the Brexit vote.
Despite this, however, there is clear evidence that consumers are becoming more cautious when it comes to their spending. Nearly half (49%) of those asked said they are not confident in their ability to spend more on non-essential items, the highest figure since February.
Sentiment also dropped more widely, with just 54% of consumers expressing confidence in their household finances – the slimmest majority since February and significantly lower than the 71% average recorded in 2015. And one in three consumers (35%) said they are less likely to spend on a major purchase, such as large household items or a car, than they were this time last year.
The subdued outlook suggests that uncertainty is causing consumers to think carefully about their overall spending pattern until the economic and political picture becomes clearer.
Paul Lockstone, managing director at Barclaycard, said: “Softer spend growth in July was perhaps to be expected given the external economic and political context. While growth did slow, some categories performed well as consumers adopted a ‘keep calm and carry on’ approach, showing that they are still prepared to spend where it matters – enjoying quality time with friends and family.
“Our confidence research tells us consumers are cautious about their future spending plans, however, with nearly half not confident in their ability to spend more on non-essential items and one in three less likely to spend on big-ticket items. These are the first full month’s figures since the EU referendum, so it’s too early to say if this is the start of a long-term trend, but it seems likely consumers will be watching the external environment carefully ahead of any major spending decisions.”