Rising inflation starts to hit consumers’ pockets
Barclaycard, which processes nearly half of the nation’s credit and debit card transactions, reported consumer spending rose by 4.4% year-on-year in January.
However, it attributed this to inflationary pressures leading to more being spent on petrol and in supermarkets.
Petrol forecourts and supermarkets both saw spend growth jump as price rises filtered through to consumers, the report said.
This drove up spending on ‘essential’ items to the highest level since Barclaycard started reporting on consumer spending in 2012.
By contrast, uncertainty over how the UK economy might fare in the year ahead saw households row back on spending in discretionary categories, with airlines, electronics, and department stores all seeing falls last month.
Two thirds of consumers say they are now more careful to seek out value for money when making purchasing decisions, while another two thirds think rising prices will increase their spending on essentials items this year when compared to 2016.
Concern about the wider implications of the weaker pound is also having an impact on consumers’ plans for the year ahead. One in five expects to cut back on overseas holidays as a direct result of currency depreciation, while a third say that sterling fluctuations will influence how confident they feel in the wider economy.
Paul Lockstone, managing director at Barclaycard, said: “January’s uplift in spending represents a strong start to the year. Big increases in the amount spent at supermarkets and on petrol, coupled with careful spending across a number of non-essential categories, does however suggest that consumers are starting to feel the impact of inflation on their everyday lives.”
Inflation rose sharply to 1.6% in December, up from 1.2% the previous month. The Bank of England expects inflation to hit its 2% target this month.