Consumer spending on hospitality remains robust, but confidence dampened

Consumer spending grew 3.5% year-on-year in July as the cost of groceries continued to push up supermarket spending, but consumers reported another month of ‘feeling the squeeze', dampening confidence in the wider economy.

As consumers increasingly felt the pressure from months of higher grocery prices and re-allocated their budget to make ends meet, consumer sentiment also weakened.

The proportion of those confident in the UK economy fell to 28% in July, the lowest figure recorded since Barclaycard began its research in 2014, and a continuation of the downward trajectory that started in March.

The outlook on spending power has also darkened; confidence in household finances fell to 56% from 69% in June, and the ability to spend more on non-essentials has also declined to 43% (56% in June).

Four in 10 consumers (43%) indicate that months of rising prices have led them to change their everyday spending habits. Of these, 54% say that they are shopping at discount stores more often, and 28% are making greater use of vouchers and discount codes.

Nearly half of Brits (47%) are ‘feeling the squeeze’ as inflation outstrips wage growth. While one in five (21%) believe that the prices of everyday items will remain steady between now and the end of the year, a slim majority (51%) disagree.

Paul Lockstone, managing director at Barclaycard, said: “Although consumer spending growth rebounded from May and June’s lacklustre performance, last month’s figure should be treated with caution. While supermarkets posted a strong performance, some of that growth will be due to higher prices. As a result, consumers would have had to budget more carefully to spend on their favourite ‘nice-to-haves’, whether that was a night out at the cinema or a meal with friends and family.

“Months of ‘feeling the squeeze’ have made consumers a little more concerned about the bigger picture. Confidence on several measures, from the UK economy to household finances, are at some of the lowest levels we’ve ever seen, and shoppers are working increasingly hard to stretch their budget. As we head into the remainder of 2017, it will be interesting to see how Brits continue to react to this ‘new normal’.”

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