Barclays: Essential Spending Returns To Growth In January

• Spending on essentials increased for the first time since August 2024, but was outpaced by the growth in non-essential spending
• January’s storms gave takeaways and streaming services a boost with more time spent indoors
• The share of online retail spending reached a three-year high, as 13 per cent of consumers said they opted to shop at home due to the wet and cold weather
• Pharmacy, health and beauty saw its strongest performance in almost three years, as the New Year encouraged a renewed focus on wellness
• The Barclays Consumer Spend report combines hundreds of millions of customer transactions with consumer research to provide an in-depth view of UK spending

Credit and debit card spending grew 1.9 per cent year-on-year in January – the highest uplift since March 2024, but remaining lower than the latest CPIH inflation rate of 3.2 per cent. Despite falling consumer confidence in the UK economy, down five percentage points to 21 per cent, non-essential spending grew 2.7 per cent, led by the resilient performance of entertainment, health & beauty and digital content & subscriptions.

Spending on essential items returned to growth in January, up 0.1 per cent, after four consecutive months of decline. Supermarket spending also increased for the first time since August 2024, up 1.0 per cent year-on-year.

For the third month running, 86 per cent of consumers are concerned about rising food prices, while 64 per cent are looking for ways to get more value from their weekly shop, also on par with November and December. Of those cutting costs, 51 per cent are making use of loyalty schemes and deals, while 27 per cent are seeking discounted or lower-priced items, such as “wonky” vegetables. Meanwhile, 16 per cent snapped up post-Christmas offers on festive food, as supermarkets sought to offload their remaining stock. 

Despite this cost-conscious consumption, food and drink specialist stores saw a 3.9 per cent increase in January. This follows one in 10 (9 per cent) making a New Year’s resolution to cook more at home, perhaps encouraging more local shopping and giving independent stores such as butchers and greengrocers a boost.

January storms boost online spending

Barclays data shows spending on clothing and department stores declined by -0.7 per cent and -0.2 per cent respectively, after posting growth in December. This comes as almost half (49 per cent) of consumers say they are planning to cut back on non-essential spending, with the majority (55 per cent) of this group limiting impulse purchases, and a similar proportion cutting down on new clothes and accessories (54 per cent).

Over a third (37 per cent) said the colder and wetter weather combined with the dark evenings in January impacted their spending. In addition, one in eight (13 per cent) reported they opted to do more online shopping from the comfort of the couch. This preference for at-home browsing drove the share of online retail spending (excluding groceries) to a three-year high in the month, at 58 per cent. 

Cinemas and streaming services soar

Entertainment continued its stellar performance into the New Year, with spending rising  8.1 per cent. Cinema spend was up 15.1 per cent, as family-friendly films Mufasa: The Lion King and Sonic the Hedgehog 3 lured in viewers.

Spending on digital content & subscriptions increased 8.3 per cent and one in five (19 per cent) said they used their entertainment subscriptions more than usual due to the weather, while growth in takeaway spending reached a year-long high, at 5.1 per cent.

Pubs keep pace with Dry January demands                                                                             

Both pubs, bars & clubs, and restaurants enjoyed growth of 2.6 per cent, showing not everyone spent the month sheltering from the cold. The increase comes despite a third (34 per cent) of consumers saying they significantly reduced their alcohol consumption in January. This suggests the hospitality industry had prepared to cater for the growing popularity of Dry January, having witnessed a rise in punters shifting to low and no alcohol alternatives.

Now trending: the influence of social media and wellness

Spending on pharmacy, health & beauty increased 10.7 per cent in January – the strongest growth in almost three years. This comes as one in five consumers (19 per cent) say they have recently been influenced by social media content to make a purchase, rising to 40 per cent for Gen Z. A higher proportion – two fifths – of consumers (41 per cent) say they have recently bought products or services in response to popular wellness trend. Trending wellness products  most commonly purchased include supplements or vitamins (19 per cent), and high protein food ranges (12 per cent).

Karen Johnson, Head of Retail at Barclays, said: “January’s figures are a positive signal that non-essential spending should remain strong in 2025. Despite expressing economic uncertainty and a cost-cutting mindset, shoppers are continuing to prioritise the things love – entertainment, wellness and evenings with family and friends.

“Social media is increasingly influencing purchasing decisions – whether it’s a trending beauty product or a must-visit holiday destination. Looking ahead to February, which brings Valentine’s Day and half term for schools, it’s likely we’ll see more of this careful balancing act, with people continuing to seek out deals and discounts to enjoy the good times without breaking the bank.”

Jack Meaning, Chief UK Economist at Barclays: “With the economy looking like it stagnated in the second half of last year, we’re expecting GDP growth to pick up to 0.9 per cent in 2025. This will have been aided by Thursday’s reduction in interest rates by the Bank of England. We expect Bank Rate to fall to 3.5 per cent before the end of the year, which should give a further boost to consumers who will once again feel the pinch as inflation rises in the coming months, albeit it temporarily.”

Overall growth figures

Source : Barclays

Image : shutterstock / 130030334 / MJTH

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