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2016 consumer spending on experience rather than fashion says report

By Don-Alvin Adegeest

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Retail

2016 has been a year of two halves. Consumer spending unexpectedly grew in the UK in the second half of the year, uplifted by Brexit, but also largely fuelled by wider economic and political factors.

In a its latest report by Barclaycard, consumer spending got off to a mixed start in 2016, with January and February seeing growth of 3.8 per cent and 3.4 percent respectively – before it dropped sharply as concerns about the EU referendum took hold. With warnings about the economic impact of leaving the EU prominent in early campaigning, spending growth fell to 1.6 per cent in March (a two-year low) and 1.9 per cent in April.

Barclaycard recorded a steady increase in overall spend growth in the second half of the year, peaking at a record high of 5.5 per cent in October – but this was accompanied by a sharp narrowing in the gap between essential and non-essential spending. Between January and June, the differential between the two categories was 5.1 per cent, but narrowed to just 2.2 per cent between July and November.

The shrinking of this gap was driven by a mix of increased spend in some categories and rising prices in others. The experience economy proved a clear winner when looking at discretionary spend that saw strong growth, whereas spending on clothing and fashion saw only a marginal increase of 2.1 percent.

Mens and womenswear saw moderate increase compared to 2015

It wasn't all bad for the fashion industry, however, as purchases of mens and womenswear grew 6.8 percent and 0.8 percent respectively, compared with 13.9 percent and 5.4 percent growth in the previous year as consumers.

Entertainment spend – which includes pubs, restaurants, cinemas and concerts – increased by a record 11.5 per cent across the year. Spending in pubs and restaurants also saw double digit increases of 13 per cent and 12.7 per cent respectively across 2016.

Paul Lockstone, Managing Director at Barclaycard, said: “Consumer spending grew 3.6 per cent in 2016, a healthy figure given that the backdrop of Brexit and other high profile economic and political issues caused uncertainty for many. When digging a bit deeper, however, it’s clear that at least some of this growth was driven not only by increased spending on the ‘experience economy’, but also by rising prices in key sectors.

“As the year came to a close, this boosted spending on essentials, compared to items families may deem ‘nice-to-have’. As we enter 2017, it seems likely that consumers will continue to watch the external environment before deciding how to allocate their cash over the next 12 months.”

Photo credit:

Photo: Oxford Street via Oxfordstreet.co.uk and Barclaycard

Barclaycard
Consumer spending