Consumer spending hits 14‐month low
Spending growth slowed to three per cent year-on-year in August as the poor summer weather led to more Britons heading abroad, impacting spending at home.
It is only the second time this year spending growth has fallen below the four per cent mark, with above-average rainfall and below-average temperatures making August the coldest in three years.
While this led to an up-tick in travel spend, which grew seven per cent on last year, it dragged down spending growth more generally.
In-store spend grew by just 0.3 per cent in the month, down sharply on the 1.7 per cent average seen so far this year, and the 2.6 per cent increase in August 2014.
Consumers supplemented already-booked longer breaks with additional shorter trips to escape the washout. However, these shorter trips were cheaper by token of their brevity, meaning there was a 15.3 per cent fall in the average transaction value for travel spend this summer.
International Airlines Group (owner of British Airways), Ryanair and easyJet have all reported strong results for the year to date, on the back of fuller aircraft. With airlines not needing to cut fares to sell the last of the summer’s seats, the average transaction value for airline spending was down 0.4 per cent this year, compared to 7.6 per cent last year.
The number of hotel transactions was 10.5 per cent higher in August, and is up 11.4 per cent over the past three months. Overall spend growth on hotels dipped to 6.5 per cent over the summer – down 0.5 percentage points on last year – thanks to a 4.3 per cent fall in average spend levels, as shorter stays and last-minute deals brought down individual transaction levels.
Despite the weather, restaurants continued to perform strongly, with growth of 13.3 per cent. Pubs performed particularly well with spending up 12.8 per cent. Transaction volumes in pubs are 19.3 per cent higher this summer, but the amount spent per transaction is down 5.4 per cent, implying that – with no fall in prices – more visits are being made but for smaller rounds.
Similarly, department stores performed well, as consumers retreated to one-stop shops. Transaction numbers in August were up 13 per cent on last year, boosting the amount spent by 7.6 per cent – its second highest level this year after July, which saw similarly poor weather.
Takeaway spend also maintained a high level of growth in August, averaging 50.2 per cent – building on the growth of 52.7 per cent seen in July.
“Even accounting for seasonal fluctuations, August saw weaker than expected growth in consumer spending at home, as households countered a wet and cold August by heading abroad,” said Chris Wood, chief operating officer at Barclaycard.
“The number of travel transactions jumped 28 per cent last month – a record for August – helping drive a 7 per cent increase in spending on holidays and family trips.
“Restaurants, supermarkets, clothing stores and household stores all saw lower levels of transactions compared to last year, though department stores and pubs benefitted as consumers retreated indoors. With the country forecast to experience an Indian Summer this month, it’ll be interesting to see whether spending levels recover.”