Barclays: Card Spending Declines In July

• Non-essential spending saw its second consecutive month of decline, with two in five saying they spent less due to the rainy weather
• Retail’s drop was less steep compared to June, while health & beauty climbed again
• The Euros propped up pubs and bars, with transactions tripling on the day of the final
• Digital content and subscriptions had a bumper month, prompted by ‘streamflation’ and popular TV series such as House of the Dragon, Supacell and The Boys
• Confidence in the UK economy climbed five percentage points, despite a dip in consumers’ confidence in their own finances
• The Barclays Consumer Spend report combines hundreds of millions of customer transactions with consumer research to provide an in-depth view of UK spending 

Consumer card spending fell -0.3 per cent year-on-year in July – a slight improvement on June (-0.6 per cent) but noticeably lower than the latest CPIH inflation rate of 2.8 per cent – as the mixed weather across the month, combined with Brits’ selective discretionary spending, continued to pose challenges for retailers. However the final stages of Euro 2024 boosted pub sales, while travel spending remained resilient as holidaymakers paid off the last of their monthly instalments.

Spending on non-essential items saw further decline in July (-0.7 per cent) compared to June (0.5 per cent), with 48 per cent of Brits making the effort to cut down on discretionary spending (up from 46 per cent last month). This comes as one in four (23 per cent) say they have participated in or would consider a ‘no-spend challenge’, where they refrain from making non-essential purchases, such as takeaways, coffees and clothes, but still spend on essentials, such as food, childcare and utilities.

After the unseasonably wet start to July, the arrival of warmer days and belated summer sales did result in a modest recovery for retail. The sector was down just -1.1 per cent, compared to a dip of -2.6 per cent in June, buoyed by a 6.4 per cent uplift in spending on health & beauty. Clothes shopping fell -2.3 per cent, but this represented a considerable improvement on June’s -7.7 per cent decline.

Two in five (39 per cent) say July’s rainy weather led them to cut-back on “summer spending”. The average Brit reduced their outgoings by £133.40, with 18-34 year-olds cutting back the most, at £158.40. This looks to have impacted both home improvements & DIY (-7.5 per cent) and sports & outdoor (-7.9 per cent), which contracted considerably, marking 13 months of decline for both categories.

A win for hospitality & leisure

Pubs, bars and clubs saw an uplift of 4.9 per cent in July – the category’s highest growth since January – as football fans flocked to their local to watch the final rounds of the Euro 2024 tournament. Despite England’s loss, the final against Spain led to payment transactions almost tripling at pubs and bars on 14^th July, increasing by 195.6 per cent year-on-year¹. This also marked the busiest Sunday of the year for pubs, with transaction volumes up 92.9 per cent compared to the average Sunday in 2024.

Entertainment’s 2023 triumph is a tough act to follow

Entertainment spending was down -6.1 per cent year-on-year, marking its greatest decrease since March 2021. This can be attributed to particularly strong growth for entertainment during the same period last year, at 15.8 per cent.

Cinema spending was down 18.6 per cent year-on-year, owing to the Barbenheimer boom of July 2023, which saw cinema sales increase 67 per cent versus the 2023 average.

Similarly, spending on live shows and concerts decreased 17.9 per cent overall in the month, with last year’s figures inflated by the release of Taylor Swift’s Eras Tour tickets. However spend did spike during the sales of Cyndi Lauper and Dua Lipa’s tours respectively, after both stars performed in front of huge crowds at Glastonbury.

Encouragingly, consumers continue to spend on experiences, with travel up 4.3 per cent – on par with June’s growth. Travel agents saw a higher increase of 6.6 per cent year-on-year, as holidaymakers settled final costs for their summer getaways.

Streaming soars but ‘streamflation’ concerns continue

Digital content and subscriptions performed well once again, enjoying an 11.1 per cent rise in July, up from 9.2 per cent  in June, as Brits tuned into popular series such as House of the Dragon, The Boys and Supacell. ‘Streamflation’ – the rising price of streaming subscriptions – also continued to have an impact, with three in five (60 per cent) consumers concerned about digital content and subscriptions becoming more costly.

On the other hand, fast food and takeaways saw muted growth compared to June, increasing  just 2.2 per cent. Of the 48 per cent planning to limit discretionary expenditure, almost half (47 per cent) are cutting back on ordering takeaways.

Supermarket shopping slows, but BBQ spending sizzles

Essential spending returned to growth in July (0.6 per cent) after declining last month (-0.9 per cent). This was largely driven by spending at food and drink specialists such as butchers and greengrocers, which saw their highest uplift (3.5 per cent) since January – a sign that the handful of sunnier days in July encouraged Brits to buy BBQ ingredients to cook at home. 

In contrast, growth at supermarkets remained flat year-on-year (0.0 per cent), though this was an improvement on June (-2.5 per cent). Shoppers remain discerning when doing the weekly shop, as the majority (63 per cent) continue to look for ways to cut back on grocery spending. Of those seeking savings half (47 per cent) are looking out for loyalty scheme discounts and deals, and buying budget, own-brand, on-offer or discounted products (all 45 per cent). As further evidence of cost-conscious behaviour, 37 per cent say coffee and drink subscriptions no longer offer the same value for money that they used to.

Economic confidence climbs, but Brits’ confidence in personal finances dips

Confidence in the UK economy improved by five percentage points in July, rising to 32 per cent – the highest level since February 2022. However Brits’ confidence in their household finances and ability to live within their means both declined, at 65 per cent (down two percentage point) and 70 per cent (down three percentage points) respectively. Following news in July that water bills will rise by almost £100 over the next five years, a third of Brits (32 per cent) said they were very concerned about the negative impact that this would have.

Karen Johnson, Head of Retail at Barclays, said: “Shoppers and retailers alike will be ready to see the end of the summer showers. It’s encouraging to see seasonal staples such as BBQ supplies, beauty buys and holiday planning delivering signals of steady recovery.

“Despite England losing in the nail-biting final of the Euros, UK hospitality emerged as a true winner, when the Euros delivered a boost for pubs, bars and clubs. With the final days of the Olympics in Paris, Taylor Swift’s return to a sold-out Wembley Stadium for her final UK Eras Tour dates, and a heatwave on the cards, we hope summer spending will finish strongly in August.”

Jack Meaning, Chief UK Economist at Barclays, said: ”While weather, sports events and concerts all look to have resulted in seasonal fluctuations, the bigger picture is that consumers are seeing their incomes and spending power rise and are becoming more confident in the overall economic outlook. This, coupled with the fact that the Bank of England has begun to reduce interest rates, should translate into stronger underlying spending growth, as we move through the second half of this year and into 2025.”

Overall growth figures

Source : Barclays

Image : Stokkete / shutterstock / 503419588 

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