Consumer card spending grew 4% in July but 60% of Brits are cutting back on discretionary purchases

Consumer card spending grew 4% in July but 60% of Brits are cutting back on discretionary purchases.

Consumer card spending grew 4% year-on-year in July 2023, less than the latest CPIH inflation rate of 7.3% and slightly lower than the 5.4% growth in June.

This comes as 60% of Brits are cutting back on discretionary purchases to cope with rising household bills, including reining in new clothes and accessories purchases, according to the latest monthly card spending data from Barclays, which sees nearly half of the nation’s credit and debit card transactions.

The back-to-school period is not expected to reverse the decline, with only two in five (42%) parents of school age children planning to buy brand new items this year.

Instead, many parents will be buying second hand uniforms online (23%), or sourcing items from families with older children who have outgrown theirs (23%). Three in 10 parents are also planning to give away their children’s old uniform to families that can’t afford new items.

While clothing retailers fell back into decline after a surge in June, the hospitality and leisure sector received a boost as Brits spent more on getaways, eating and drinking out, and concert tickets for artists such as Taylor Swift and Foo Fighters, with spending on entertainment rising 15.8%.

Summer holidays and social plans also fuelled growth at pubs and bars, while the rate of decline for restaurants slowed.

July’s wet weather also contributed to hampered retail spending, while "insperiences" (indoor experiences) enjoyed an uplift as Brits spent more on takeaways and streaming services.

Concerns around food prices and the rising cost of living are also impacting economic confidence as just one-in-five (21%) report feeling confident in the strength of the UK economy, down 2% month-on-month in July.

Esme Harwood, Director at Barclays, said: "While July’s weather was a wash-out for clothing retailers, it was a ray of sunshine for takeaways and streaming services, which performed better than expected. Entertainment also enjoyed a huge boost, largely thanks to pre-sales for Taylor Swift’s and Foo Fighters’ upcoming stadium tours."

Abbas Khan, UK Economist at Barclays, added: "Over the first half of 2023, high inflation rates have weighed on real household disposable incomes and constrained consumption. On the bright side, this headwind is expected to abate over H2 as inflation in essential categories such as energy and food is set to ease.

"However, offsetting this, more households are set to experience higher mortgage costs as they refix onto higher rates. Accordingly, while we do not expect a consumer recession in the coming quarters, growth is likely to be meagre."