High street spending slowed during rainy August

High street sales were hampered by wet weather in early August, reveals the latest consumer card spending index from Barclays, as fewer Brits visited shops.

The report reveals that while consumer spending grew 2.8 percent year-on-year in August, it was noticeably lower than the latest CPIH (Consumer Prices Index including owner occupiers' housing costs) inflation rate of 6.4 percent and July’s growth figure of 4.0 percent.

August was another challenging month for clothing, with spending growth down -0.7 percent, a less significant drop than in July when it was -3.1 percent. Department stores saw a boost of 11.4 percent, while general retailers and catalogues was 4.4 percent. However, sports and outdoor retailers saw a drop of -3 percent.

Spending at pharmacy, health and beauty stores held up at 5.2 percent, likely boosted by holidaymakers buying suncream and other toiletries for trips away.

In addition, the report reveals that consumers are noticing that certain products have had premium elements reduced or downgraded, known as “skimpflation,” yet still cost the same or more. Over half (52 percent) of British consumers have noticed it with food and drink products, as well as 44 percent with clothing and 37 percent for toiletries and cosmetics.

52 percent of Brits are also reining in discretionary spending due to rising household bills, with eating out at restaurants (61 percent), buying new clothes and accessories (59 percent), and ordering takeaways (58 percent) emerging as the non-essentials most deprioritised.

Christmas budgeting starting early this year

The report combines hundreds of millions of customer transactions with consumer research to provide an in-depth view of UK spending adding that almost a third (31 percent) of consumers expect that this coming Christmas will be more expensive than last year.

A fifth (19 percent) of consumers are worried about being able to keep up with outgoing costs, while one in five (17 percent) have started to put money aside to help fund their festivities.

Esme Harwood, director at Barclays, said in a statement: “The rainy weather impacted high street and hospitality venues in August, but Brits were still keen to spend on memorable summer experiences. The huge Box Office success of ‘Barbie’ and ‘Oppenheimer’ meant entertainment enjoyed another strong month, while holidays abroad boosted international travel and pharmacy, health and beauty stores.

“Shrinkflation – and now “skimpflation” – are increasing concerns for value-seeking shoppers. However, Brits’ confidence in their household finances is unwavering, suggesting they remain resilient in the face of these inflationary pressures.”

Abbas Khan, UK Economist at Barclays, added: “Muted spending growth in August is in line with other data sources, such as soft PMIs and stalling consumer confidence, suggesting that the bite from monetary tightening is starting to be felt more acutely.

“However, with further moderation in inflation and strong wage growth set to support real household disposable incomes, we continue to think the economy will avoid a recession in the coming quarters, even if growth is only set to be sluggish.”