UK consumer spending dipped slightly in April, falling by 0.1% compared with the same time last year, according to the latest Barclays Consumer Spend report. This is the first drop since November and indicates that, with prices still rising faster than spending, households are tightening budgets.
Much of the spend that did come through was on essentials. Fuel stood out, with spending jumping 10.4% — the biggest rise in well over a year — helping push overall essential spending up by 0.3%. However, non-essential spending slipped by 0.3% after picking up in March, with consumers reporting that they were prioritising saving.
For retail, the picture was similar. Retail spending fell by 0.7%, with groceries down 1.6% as shoppers cut back or traded down. But there were some brighter spots; clothing spending rose by 1.1%, and pharmacy, health and beauty was up 4.4%, showing that some categories continue to hold up when shoppers feel purchases are worthwhile. The strength of these two categories – fashion and wellness – also reflects the priorities of younger consumers, who have fewer fixed costs and are more willing to spend on looking and feeling good.
A sense of caution prevails
However, the wider mood is one of caution. People feel broadly the same about their own finances and job security as they did the month before, but are less confident about spending on anything beyond the basics. Confidence in non-essential spending has dropped to its lowest level in more than two years.
The pattern is clear across sectors. Travel saw one of the sharpest falls, down 5.7%, as higher costs and ongoing uncertainty about the impact of the Middle East conflict on jet fuel put people off booking trips. Eating and drinking was flat overall, although pubs in London enjoyed a boost during the Marathon weekend.
Meanwhile, lower-cost options at home are doing well. Spending on digital content and subscriptions rose by 9.2%, showing that consumers are trading nights out for nights in.
The analysts’ view
Jack Meaning, chief UK economist at Barclays, said that subdued spending shows shoppers are adapting to the shock from the Middle East. “With uncertainty high both at home and abroad, it is unsurprising to see confidence falling,” he said. “The key unknown for the UK outlook is how long this uncertainty will last. If confidence remains subdued for too long, and consumers continue to limit their spending as a result, it will be a challenge for households and businesses to weather the storm.”
Karen Johnson, head of retail at Barclays, reiterated that this is unlikely to come as a shock to retailers. “In April, we saw consumers taking precautionary action in response to renewed cost-of-living concerns – cutting non-essential spending, building their savings and looking for ways to reduce their outgoings,” she said. “There’s no doubt people will continue to pay close attention to their budget amid ongoing uncertainty, however it’s reassuring to see that the majority feel confident in their ability to manage their day-to-day spending and to make sound financial decisions.”
For retailers, the picture is mixed. Shoppers are still spending, but more carefully. Everyday costs are taking priority, while anything extra needs to clearly earn its place.
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