Non-essential consumer spending falls to lowest levels since September 2022

Almost half of UK consumers are cutting back on non-essential spending such as clothing, accessories and dining out, according to new data from Barclays.

Overall consumer spending grew at a rate of 1.9% in March - which is on par with February’s spending figure. This indicates that consumer spending is at its lowest level since September 2022. 

Prices for essential spending remained steady at 2.4%, while non-essential spending saw its smallest uplift at 1.6%. Barclays attributed this to heavy downpours across the country. 

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Face-to-face retail spending decreased by -2.1% while restaurants had to brace for a staggering -12.6% drop due to the spring showers.  

However, rent and mortgage payments only rose by 1.8%, providing welcome relief for households already grappling with council tax and utility bill hikes. 

While retail and restaurants suffered from hampered sales, pubs and cinema spending were boosted thanks to events like the Six Nations, St Patrick’s Day and the highly-anticipated release of Dune: Part Two.  

But there are some signs that the economy is “expanding”, according to Jack Meaning, chief UK economist at Barclays. 

He says: “With an expectation that the Bank of England will cut interest rates from June, and banks responding by reducing mortgage rates, our research suggests that the housing costs that have been a drag on consumers for over a year are on the cusp of a turn, and will become a boost to spending from H2 and beyond.” 

House prices remain stable 

Despite the dip in consumer spending on non-essential goods, there is a silver lining in the housing market. 

Brits only forked out 1.8% more on mortgage and rent payments this March compared to last year, which is a sharp drop from June 2023 when payments peaked at around 12.2%. Moreover, the latest Halifax house price index also recorded a month-on-month decline for the first time since September 2023. 

However, Barclays points out that this is not the case for all UK consumers. One in six people are not confident about being able to meet their monthly mortgage or rent payments, and 18% are adjusting their spending habits to make ends meet. 

This has resulted in homeowners and renters cutting back while “looking for additional sources of income, such as delaying renovations and renting out spare rooms,” according to Mark Arnold, head of savings and mortgages at Barclays UK. 

Arnold however adds that there are “reasons to be optimistic”, as “housing costs are stabilising, the inflationary tide is easing, and interest rates are predicted to fall over the coming months, all of which should translate into increased consumer confidence and spending.”

Food shop sales slowed to 2.7% 

Consumer spending on essential items continued to grow at 2.4%, which was close to February’s figure of 2.3%. The growth was propped up by an uptick in fuel prices such as petrol and diesel. 

But food shop sales took a hit - grocery spending only nudged up by 2.7% as a result of shop price inflation falling to its lowest level since the cost of living crisis arguably began. Food prices dropped 0.3% month-on-month, and non-food items faced a 0.4% decline due to Mother’s Day and Easter. 

Despite people buying less than before, concerns about general inflation have been sky-high and stand at 87%, reversing last month’s dip to 84% which was the lowest level Barclays had seen since it began tracking in December 2021. 

As a result, over two-thirds of people are on the hunt for ways to get the most bang for their buck from their weekly shops. Some ways they are doing this is by buying more items at discounts, stocking up on essentials when they’re on offer, cutting back on impulse buying at checkouts, or diving into the ‘no-spend’ challenge and avoiding any non-essential purchases, such as takeaways and clothing while prioritising essentials like food, childcare and utilities. 

Karen Johnson, head of retail at Barclays, said that while the wet weather has been a “key factor in the slowdown in discretionary spending” resulting in “fewer visits to the high street and to hospitality venues”, this “initial lul” will end and “spending will rebound in the coming months”. 

Johnson attributes this to better weather conditions, the energy price cap drop, an uplift in the National Minimum Wage, and anticipation of major events such as Taylor Swift’s Eras Tour and the Paris 2024 Olympics.