UK Card Spending Shows Growth in June, but Concerns Remain Over Inflation and Shrinkflation

UK Card Spending Shows Growth in June, but Concerns Remain Over Inflation and Shrinkflation

(IN BRIEF) Consumer card spending in the UK showed a year-on-year growth of 5.4% in June, driven by warm weather and increased socializing at pubs and bars. Spending on groceries surged by 9.5%, although shoppers remain concerned about “shrinkflation” and shortages of certain products. Spending on non-essential items rose by 5.7%, with clothing retailers and health & beauty sectors experiencing growth. Restaurants saw a decline in spending, while pubs, bars & clubs saw a boost. Brits prioritized spending on holidays abroad, with spending on airlines outpacing domestic hotel spending. However, the UK economy still faces challenges, including inflation and pressure on household cash flows.

(PRESS RELEASE) LONDON, 12-Jul-2023 — /EuropaWire/ — Consumer card spending grew 5.4 per cent year-on-year in June – less than the latest CPIH* inflation rate of 7.9 per cent, yet noticeably higher than in May (3.6 per cent) – as the warm weather encouraged Brits to shop for summer clothes and socialise at pubs and bars. However, supermarket shoppers remain concerned about “shrinkflation”, while restaurants saw another slowdown as consumers continue to cut back on eating out to offset rising household bills.

Spending on groceries soared 9.5 per cent year-on-year – the highest growth in the category in two years, yet still lower than the rate of food price inflation (18.4 per cent). This comes as over two thirds (67 per cent) of shoppers say they are looking for ways to reduce the cost of their weekly shop, with almost a third (32 per cent) of these consumers shopping at multiple supermarkets to source a range of deals and two in five (39 per cent) are buying more “yellow sticker” items.

In a further sign that Brits are seeking out value-for-money wherever possible, discount stores were up 8.8 per cent, seeing their largest growth since April 2021. Eight in 10 (81 per cent) are worried about “shrinkflation” – when products are sold in smaller packages or portion sizes yet cost the same or more than they used to. In June, more Brits (70 per cent) had noticed examples of shrinkflation than in May (65 per cent), particularly when buying chocolate (46 per cent), crisps (42 per cent), packs of biscuits (37 per cent) and snack bars (32 per cent).

In response to shrinkflation, 29 per cent of shoppers are buying their favourite products less often – only when they want to treat themselves – while almost a fifth (18 per cent) are switching to brands which haven’t changed the size of their products.

Shoppers are also spotting shortages of certain products at the supermarket. Almost two fifths (37 per cent) have noticed that some basic items – such as eggs, fresh produce and tinned staples – are regularly unavailable, while a fifth (20 per cent) feel that there are fewer new products being introduced onto the shelves.

Sunny spell brings surge in summer spending

Spending on non-essential items increased by 5.7 per cent in June – more than in May (3.0 per cent) – largely thanks to the sunny weather driving demand for socialising with friends and family. The higher temperatures inspired shoppers to renew their summer wardrobes, with spending at clothing retailers rising 4.0 per cent – the highest growth in almost a year – while pharmacy, health & beauty had its biggest boost (6.8 per cent) since January.

After a decline in May (-1.9 per cent), sports and outdoor retailers returned to growth (1.1 per cent), as consumers embraced more active, outdoor lifestyles and purchased camping equipment for Glastonbury and other festivals.

Meanwhile, home improvement and DIY stores, including garden centres, were another bright spot, seeing their first growth in over a year (3.9 per cent) as Brits took advantage of the sunnier weather to spruce up their homes and gardens.

A mixed picture for eating and drinking 

Spending at pubs, bars & clubs increased 8.4 per cent – their biggest boost since January this year. This growth was driven by several factors, including the warm weather, rising beer and alcohol prices, Father’s Day celebrations, and the respite from industrial action in the transport sector.

In contrast, restaurants saw yet another month of decline (-8.2 per cent), with three in 10 (30 per cent) Brits planning to spend less on eating out in order to offset rising household bills.

Instead, many are shifting their spending to specialist food and drink stores, including butchers and greengrocers, which enjoyed their highest increase (7.2 per cent) since September 2021. This implies that Brits are choosing to spend more on high-quality ingredients for BBQs and premium home-cooked meals instead of eating out at restaurants.

In addition, almost a fifth (18 per cent) of consumers say that to save money when dining out this summer, they are opting to order just a main meal, with no starter or dessert.

Growth in getaways

Brits continue to prioritise spending on holidays abroad, outpacing demand for staycations. Spending on airlines increased 33.5 per cent, significantly greater than the growth of spending on international and domestic hotels, resorts and accommodation (up 5.4 per cent).

Spending in the transport sector is also being increasingly impacted by “drip pricing” – where companies add extra fees and charges during the online checkout process, meaning that the final price is higher than what was originally advertised. More than four in 10 (43 per cent) consumers report that they have noticed more examples of “drip pricing” when shopping online, especially on airline tickets (47 per cent).

Esme Harwood, Director at Barclays, said: “June saw Brits get into the swing of summer, bringing a welcome boost to several sun-starved categories.

“Pubs & bars benefitted from Brits soaking up the sunshine in beer gardens, while butchers and garden centres saw a jump thanks to the arrival of barbecue season. Even clothing retailers, which have struggled since the start of the cost-of-living crisis, returned to growth, as consumers took advantage of the heat to refresh their summer wardrobes.”

Will Hobbs, Chief Investment Officer, UK Wealth Management, Barclays said: “The UK economy remains in a precarious spot. Inflation contagion is perhaps furthest advanced here on the evidence of incoming wage and core inflation data. There is more work for central bankers yet, even as the creaks and strains on the mortgage and other borrowings become increasingly audible.

“Difficult quarters lie ahead as the surge in interest rates continues to put pressure on household cash flows. However, there are mitigants. Much of that extra mortgage strain will fall on households more able to bear it, with significant excess savings still left over from the pandemic.”

Notes to editors

*CPIH: Consumer Prices Index including owner occupiers’ housing costs

Established in 2014, Barclays issues a monthly press release commenting on consumer spending trends.

Since January 2023, this report has been renamed The Barclays Consumer Spending Index. The methodology and data sources remain unchanged. These sources include Barclays debit card and Barclaycard credit card transactions, as well as non-card payments (e.g. direct debits) to calculate spending on utilities.

Across its issuing and acquiring businesses, Barclays sees nearly half of the nation’s credit and debit card transactions, which provides us with unique insight into UK consumer spending. This press release is based on consumer card spending data from Barclays’ issuing business – i.e. Barclays debit card and Barclaycard credit card transactions. It relates to the period 20th May 2023 to 23rd June 2023. It is compared with 21st May 2023 to 24th June 2023.

The consumer confidence survey in this press release was carried out between 23rd and 27th June 2023 by Opinium Research on behalf of Barclays. There were 2,000 respondents, providing a representative sample of UK consumers by age, gender, region, and income group.

About Barclays

Barclays is a British universal bank. We are diversified by business, by different types of customer and client, and geography. Our businesses include consumer banking and payments operations around the world, as well as a top-tier, full service, global corporate and investment bank, all of which are supported by our service company which provides technology, operations and functional services across the Group. For further information about Barclays, please visit our website home.barclays.

About Barclays Market and Customer Insights

Barclays Market and Customer Insights helps businesses keep up to date with spending trends, monitors their market position and enhances their understanding of customer behaviour, based on actual customer spending. For further information, please email contact-MCI@barclays.com.

Media Contact:

Oliver Palca
oliver.palca@barclaycard.co.uk

Dee Fallon
deirdre.fallon@barclays.com

ukpressoffice@barclays.com

SOURCE: Barclays