Consumer spending growth hits 14-month low, latest update from Barclaycard shows

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Growth in UK consumer spending slowed to its lowest level for 14 months in March rising just 1.1% compared to last year, according to the latest monthly update from Barclaycard, which processes nearly half of all the UK’s debit and credit card transactions.

Despite improving employment figures, growth fell below the rate of inflation for the first time in six months as household budgets continue to be squeezed by wage growth failing to keep pace with rising household costs.

Spending was also impacted by a robust comparator last year due to the strong sales leading up to an earlier Easter.

Although inflation has fallen to 1.7% household bills are up by over 3% and wage growth is stuck at around 1.4%, leaving consumers with little choice but to cut back on discretionary spending to balance the books.

They are continuing to resist the temptation of the high street and are instead going online to get the best deals, leaving in-store hardest hit – down 0.3%, its lowest level of growth since January last year and especially weak given the country was gripped by freezing temperatures in March last year, which discouraged people from venturing out.

Online growth continued to outpace the high street, albeit at its slowest rate since the end of 2011, showing growth of 6.4%.

Category spend

‘Essential’ spending, such as grocery and supermarket shopping and petrol, fell 5.2% on last year, as the average value of each grocery transaction was down 9.1%.

Spend on petrol was down 8.1%, partly driven by falling forecourt prices which are at their lowest level in three years.  The number of transactions was also down though, by 3%, suggesting that consumers are using their cars less. This picture is also borne out by public transport spend growing 9.1%.

Spending on entertainment grew strongly however – up 7.1% – as households felt they had cut themselves enough slack elsewhere to be able to spend a little more on enjoying themselves. Restaurant spending led the way, growing 11%.

Clothing also remained strong, rising 9.9% and posting its second best performance of the last two years.

The buoyant housing market continued to push up spending on DIY, which rose 16.6% in March – its highest reading in the past two years. And the early spring weather helped push garden centre spend up by over a third (36.2%).

Val Soranno Keating, CEO of Barclaycard, said: “While a number of economic indicators are pointing in the right direction, with employment up and inflation falling, consumer spending remains in the doldrums, registering a drop in real terms compared to last year.

“There may be more people in employment, but the economic recovery has not yet translated into wage growth, which continues to be sluggish.  With predictions that wages won’t return to pre-recession levels for another three years the outlook for consumer spending is set to be uncertain for some time to come.”

Spending in detail

Total spend growth March 2013 – March 2014 (select categories)

Rising   Falling  
Garden Centres é 36.2% Petrol ê 8.1%
DIY Stores é 16.6% Furniture Stores ê 5.5%
Shoe Shops é 14.1% Supermarkets ê 2.6%
Family Clothing é 14.0% Electronic Stores ê 2.1%
Car Parts & Accessories é 12.4% Cinema, Theatre & Dance ê 0.7%
Women’s Clothing é 11.3%    

 Total spend growth March 2013 – March 2014 (key retail categories)

Rising/Flat   Falling  
Clothing é 9.9% Electronic Stores ê 2.1%
Department Stores è 0.0% Supermarkets ê 2.6%

Online spend growth March 2013 – March 2014 (top performing categories)

Rising  
Men’s Clothing é 56.3%
Garden Centres é 51.9%
Women’s Clothing é 40.1%
DIY Stores é 39.8%
Family Clothing é 22.0%
Department Stores é 20.5%