UK consumer spending strengthens in February as Covid rules ease
Consumer spending in the UK strengthened in February as offices reopened and social life resumed following the relaxation of Covid rules, but the rising cost of living is starting to shake household confidence, according to data released Tuesday.
Consumer spending on cards rose 13.7% in February compared to the same period in 2020, accelerating after a 7.4% growth impacted by Omicron in January, figures from payments company Barclaycard show. .
Figures reflect almost half of all credit and debit card transactions in the UK, but are not adjusted for inflation, meaning some of the growth reflects rising prices rather than increased consumption.
Barclaycard said the 12% growth in spending on essentials was driven by fuel purchases – due to higher prices at the pump as well as a return to travel.
However, spending on non-essential items was 14.5% higher than in February 2020 – the fastest growth since before Omicron emerged – as people bought clothes and beauty products while returning to restaurants, bars and clubs as well as in the workplace.
The travel sector had its best month since the start of the pandemic, Barclaycard said, with spending now above February 2020 levels for hotels and resorts, and a rapid recovery – although still well below pre-pandemic levels – for airlines and travel agents.
Jose Carvalho, head of consumer products at Barclaycard, said the increased spending showed people were “eager to get the most out of life” after the easing of coronavirus restrictions, but noted that he There had also been a “shift in consumer habits” towards more price-conscious behavior.
A Barclaycard survey in mid-February found almost half of consumers expected inflation to affect their household budget in February, with around 45% buying own brand products rather than products brands in supermarkets to reduce costs.
Figures released separately by the British Retail Consortium, an industry body, on Tuesday painted a similar picture of consumers keen to make the most of new freedoms, while worrying about rising costs.
The BRC-KPMG Sales Monitor showed year-on-year growth in total retail sales hit 6.7% in February, slightly above the three-month average growth rate of 6.5. % but well below the 12-month average of 11.3%. . The figures are not adjusted for consumer price inflation, which stood at 5.5% in January.
Food sales remained broadly flat, with growth driven by in-store spending on products such as furniture, clothing and jewelry.
But Helen Dickinson, chief executive of BRC, said the future looked “increasingly uncertain” with inflationary pressure likely to hit discretionary spending.
The Resolution Foundation warned on Tuesday that families across Britain should ‘prepare for an even deeper squeeze in living standards’ as the conflict in Ukraine is likely to push inflation above 8% in spring.
The think tank predicted in its annual living standards outlook that inflation would average 7.6%, well above the Bank of England’s current forecast, in the financial year 2022-23. After factoring in wage growth and changes to benefits, he predicts typical household incomes would be 4%, or £1,000, lower than the previous year and by 2025-26 would still be lower to where they were in 2021-22, as the economy emerged from the worst of the pandemic.