The Impact of Uncertainty on Consumer Spending Habits
In March, consumer card spending saw a year-on-year increase of 0.9 per cent, which was down from the previous month’s growth rate of 1.0 per cent. This slowdown can be attributed to the ongoing concerns about the cost of living and economic uncertainty. While essential spending returned to growth at 0.5 per cent, discretionary spend growth slowed to 1.1 per cent, with travel experiencing its first decline since March 2021, dropping by 3.3 per cent.
Consumer Confidence Remains Strong
A survey conducted by Barclays revealed that the majority of UK adults (71 per cent) feel confident in their ability to live within their means each month and manage their household finances effectively (67 per cent). This suggests that despite the uncertainty surrounding the Middle East conflict, consumers remain resilient and committed to managing their financial affairs prudently.
Impact on Major Purchases and Savings
The survey also found that one in seven UK adults (14 per cent) are delaying major purchases or financial decisions due to uncertainty. Conversely, 14 per cent of respondents are building up a savings buffer in case costs rise. This highlights the importance of financial preparedness during times of economic uncertainty.
Consumers’ Concerns About Rising Costs
- Rising food prices: 76% of consumers reported concerns about rising food prices in March, up from 64% in February. This reflects the impact of global events on the supply chain and food production.
- Rising energy bills: 81% of respondents were concerned about rising energy costs, a slight increase from the previous month’s 79%.
- Rising oil/gas/fuel prices: 82% of consumers reported concerns about fuel price increases, up from 80% in February.
- Rising household bills: 76% of respondents were concerned about rising household bills, a slight increase from the previous month’s 75%.
- Inflation: 78% of consumers reported concerns about inflation, up from 74% in February.
- Economic slowdown: 69% of respondents were concerned about an economic slowdown, a slight decrease from the previous month’s 71%.
- Supply chain disruption: 70% of consumers reported concerns about supply chain disruptions, up from 68% in February.
- Rising travel costs: 59% of respondents were concerned about rising travel costs, down from 62% in February.
- Rising interest rates: 56% of consumers reported concerns about rising interest rates, up from 54% in February.
- Travel disruption: 56% of respondents were concerned about travel disruptions, down from 60% in February.
Travel Spending Takes a Hit
After five years of consistent growth, travel spending saw its first decline since March 2021, dropping by 3.3 per cent. Within the category, travel agents (-4.6 per cent), airlines (-4.1 per cent) and public transport (-2.9 per cent) all experienced declines. The majority of consumers (70 per cent) cite concerns about rising travel costs as a reason for their spending habits.
Hotel and Accommodation Spending Sees Growth
In contrast, spend on hotels, resorts & accommodation increased by 1.2 per cent, potentially due to the preference for UK-based “staycations” and a rise in domestic bookings during the Easter break.
The data suggests that consumers are adapting their spending habits to cope with the uncertainty surrounding the cost of living and economic conditions. While essential spending remains resilient, discretionary spend growth has slowed, and travel spending has experienced its first decline since 2021. As the situation continues to unfold, it will be crucial for policymakers and businesses alike to closely monitor consumer sentiment and adjust their strategies accordingly.