Despite concerns about inflation, payment card spending in the UK experienced a substantial increase of 14.2% in October compared to the same month in 2019, according to a new report by Barclaycard. This growth in spending was also reflected in retail sales, as reported by the British Retail Consortium (BRC) and KPMG.
Barclaycard highlighted that while consumers were traveling more in October and there was a strong demand for entertainment, rising household bills compelled individuals to reduce their spending on non-essential items. However, the onset of autumn weather and the release of new films and TV shows led people to opt for takeaways and indoor entertainment options instead.
Although overall spending on non-essential goods experienced a rise of 14.6%, clothing sales did not perform as strongly as in September, with only an 8.9% increase compared to over 10% previously. This suggests that consumers may be cutting back on their retail spending. Department stores also witnessed a decline of -3.1% after two months of growth.
According to the Barclaycard report, 88% of consumers expressed concerns about the impact of inflation on their household finances, showing a slight improvement from September’s figure of 90%. Additionally, 38% of respondents reported spending less on discretionary items, and 29% of those worried about inflation are reducing their participation in social events, including dining out. These cautious measures could also impact the demand for new clothing.
The BRC and KPMG’s monthly report on retail sales revealed a year-on-year increase of 1.3% in October and a month-on-month increase of 0.6%. Furthermore, it showed a 6.3% growth compared to October 2019. BRC Chief Helen Dickinson stated that consumer demand is recovering in anticipation of Christmas, with some individuals starting their holiday shopping early and beauty advent calendars selling well. The revival of social events has also positively impacted the clothing and footwear sectors.
Paul Martin, UK Head of Retail at KPMG, commented that the reported squeeze on household spending has not manifested itself yet, as consumers continue to be willing to shop. However, both reports indicate that consumers remain cautious, suggesting that any negative news regarding the pandemic or the economy could lead to a shift towards saving instead of spending.
For more information, you can refer to the full Barclaycard spending report here and the BRC/KPMG monthly sales monitor here.
