Bumper box office takings, strong trade in pubs and a rush for winter clothes drove a solid rise in consumer spending last month, according to new figures.
Barclaycard said spending rose 5.5% on a year earlier in October, the strongest growth since it started publishing monthly health checks on consumer finances in 2011. But it warned the trend of solid spending growth could soon fizzle out as households worry about inflation.
It also highlighted that not all October’s spending growth was down to consumer resilience, with part of the rise merely reflecting the fact some things were more expensive than a year ago. With the weak pound pushing up prices on forecourts, for example, petrol spending was up 6.6% in October, the fastest increase for more than two years. Hotel spending rose 11.2% as Britons faced unfavourable exchange rates when travelling abroad.
Amid warnings that the weaker pound will squeeze living standards in the UK, a poll of 1,655 people to accompany Barclaycard’s spending figures recorded a sharp drop in consumer sentiment. Only a third of people said they felt confident in the UK economy, compared with nearly half in September.
The poll also noted widespread worries about higher prices after reports of tussles over pricing between supermarkets and a number of food manufacturers, including Birds Eye fish fingers, Walkers crisps, Typhoo and Unilever, the owner of Marmite. Imports to the UK have become more expensive since the vote to leave the EU sent the pound down sharply against other currencies.
The cocktail of slower economic growth and rising inflation is widely expected to erode household incomes and last week the Bank of England warned people to prepare for higher prices.
Barclaycard said 81% of shoppers expected to see an impact on the cost of everyday goods from changes in inflation over the next 12 months.
The pound slumped the 30-year lows against the dollar after the shock vote to leave the EU in June and then fell further last month as comments from ministers suggested they would go for a hard Brexit deal that leaves the UK shut out of Europe’s single market in return for tighter immigration controls.
“The backdrop of ‘hard Brexit’ headlines, the weakening pound and high profile issues such as ‘Marmite-gate’ mean consumers are starting to worry about the impact of inflation on their everyday lives,” said Barclaycard managing director Paul Lockstone.
“As we approach Christmas, an expensive time in many households, many consumers are telling us they plan to rein in their spending to ensure they are able to make ends meet.”
Cinema takings were one of the key drivers in last month’s rise in consumer spending, helped by the release of The Girl on the Train, Inferno and Trolls. Cinema spending rose a record 20.9% on a year earlier. Reflecting a more general trend for consumers to favour experiences over things, spending at pubs and restaurants was also up strongly, by 12.5% and 12.2%, respectively.
Barclaycard, which processes nearly half of UK credit and debit card transactions, said spending on clothing rebounded in September as shoppers picked up winter clothing. Spending rose 4% on a year ago following a 1.8% drop in September.
Separate figures from the British Retail Consortium also noted a pick-up in clothes sales last month. That helped lift overall takings for retailers in October with sales up 1.7% on a year earlier in like-for-like terms, the biggest rise since January.
The industry group also noted that foreign shoppers continued to boost retail sales as they come over the UK to take advantage of the weak pound to buy luxury items at lower prices.
