Discount retail spend rises by nearly a quarter in May, Barclaycard reports

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Discount retailers surged, with spending up nearly a quarter in May, according to the latest monthly data from Barclaycard, which processes nearly half the UK’s debit and credit card transactions. The average transactions fell again, however, as consumers continued to trade down for value.

Overall, consumer spending rose 3.1% in May as the milder weather and bank holiday weekends led to higher spending on clothing, eating out and travelling, he increase in May follows a 3.7% rise in April and is the second successive month of above inflation increases after a flat start to 2014. But consumers remain cautious, switching spend and trading down to treat themselves.

The Barclaycard research found that ‘non-essential’ spend – such as clothing, department stores, entertainment and travel – was the biggest beneficiary, growing 4.6% as households used the school holidays as an excuse to update the kids’ wardrobes, the spring weather to eat out more and the bank holidays to get away for a long weekend.

Clothing performed particularly strongly, growing 11.4% on last year, driven by a 17.4% rise in spend on family clothing. Similarly, above-average temperatures across the UK meant 13.2% more was spent on eating out, and the two bank holiday weekends helped push up online hotel spending 20%.

Electronic stores also saw strong growth of 6.8% – possibly as shoppers bought a new TV ahead of the World Cup – and department store spend nudged up 1.8% as they became a destination for a day’s shopping.

But continuing pressure on budgets from weak pay growth and rising costs is capping households’ ability to splash out and they were forced to make cutbacks elsewhere to buy new clothes, book a hotel room and have an extra meal out.

Despite further signs in May that the economy is recovering, households are yet to see signs of real improvement in their own finances. Rising inflation and higher housing costs are soaking up wage growth, limiting consumers’ ability to ‘splash out’ and forcing them to balance the books elsewhere in order to treat themselves.

This trend was evident with consumers continuing to switch to discount retailers. Following a 30% rise in April, the Barclaycard Value Index, which measures spending in cut price clothing outlets, budget grocery stores and discount retailers, registered a 23% increase in the 12 months to the end of May. And a 6% rise in public transport spending was cancelled out by a 5.5% fall in petrol spending, as households switched from using the car to taking the bus to save money.

Online spending grew 13.1% in the month, posting its best performance in a year and recovering from a slowdown in April, caused by the late Easter. This was helped by significant growth in spending on clothing – which was up 35.8%, echoing its strong performance overall – and on DIY, which grew 27% as the strong housing market drove up home improvements.

Regionally, Northern Ireland saw strong spending growth of 4.4%; whereas Scotland had a tough May and fell behind with spend growth of just 1.8%, which is flat when inflation is accounted for.

Val Soranno Keating, CEO of Barclaycard, said: “Clothing stores and restaurants felt the benefit of one of the warmest springs on record and the May bank holidays, but the overall picture is one of continuing caution.

“There remains a disconnect between the improving economic picture nationally and what households are experiencing locally – so they’re spending a bit more here and there but aren’t yet ready to splash out.  This is keeping a lid on overall growth.

“While there are clearly positive signs, until we see the improvements at the macro level feed through to households we expect consumers to remain cautious and increases in spending to continue to be muted.”

Spending in detail

Total spend growth in select categories (May 2013 – May 2014)

Rising Falling
Family clothing é 17.4% Furniture stores ê 1.0%
Restaurants é 13.2% Utilities ê 2.0%
Women’s clothing é 13.1% Men’s clothing ê 3.4%
Shoe shops é 11.0% Petrol ê 5.5%
Electronic stores é 6.8% Garden centres ê 5.5%
Public transport é 5.7%

Total spend growth in key retail categories (May 2013 – May 2014)

Rising/Flat
Clothing é 11.4%
Supermarkets é 2.o%
Electronic stores é 6.8%
Department stores é 1.8%

Online spend growth in top performing categories (May 2013 – May 2014)

Rising
Men’s clothing é 55.6%
Women’s clothing é 48.1%
Electronic stores é 30.8%
Family clothing é 28.1%
DIY stores é 27.2%
Hotels é 20.0%