UK consumers are cutting back on non-essential spending to offset rising inflation, according to payment card data for February.
Barclays, which sees nearly half of the nation’s credit and debit card transactions, reports that consumer card spending grew by just 5.9% compared to February 2022. That’s well below below the latest CPI inflation rate of 10.1%, due to a reduction in discretionary purchases. The year-on-year comparison is also affected by the lifting of Covid-19 restrictions last year, when pent-up demand caused a spike in spending.
A deeper dive into the figures reveals that spending on groceries increased by just 6.6% — despite food inflation of 16.7% — as shoppers cut down on luxuries and one-off treats and bought more from stores’ own-brand and value ranges. People are also shopping at multiple supermarkets to source a wider range of deals and spending more with discounters Aldi and Lidl.
In response to rising household bills, the majority of consumers are cutting down on discretionary card spending on things like clothing and restaurant meals. Meanwhile, in-home entertainment is growing with February seeing a 2.2% rise in spending on digital content and subscriptions.
Silvia Ardagna, head of European Economics Research at Barclays, said that persistent high inflation is continuing to take a toll on spending.
“However, some survey indicators for consumer confidence, and the recent business activity in the manufacturing and services sectors, both point to tentative signs of a rebound,” Ardagna added. “The labour market remains tight, with wage growth too strong for the Bank of England to stop hiking. We expect an additional 25bp increase to the Bank rate in March to 4.25%.”
