Spending growth slows to 2.4% as consumers feel ‘inflation squeeze’

Consumer spending growth slowed to 2.4% year-on-year in October which, with inflation at 3%, equated to a contraction in real terms.

Brits cut back across the board to cope with their diminished spending power, and in anticipation of a potential interest rate hike.

Data from Barclaycard revealed that spending on essentials (2.9%) outstripped discretionary spend growth (2.2%) for the second month running.

The overall trend of paring back indicates that consumers have adapted to months of ‘feeling the squeeze’ of higher inflation and stagnant wage growth. This could explain why 64% said they were confident in their own household finances.

Brits are not optimistic about the UK economy, however, with just 31% expressing confidence about its future. This is the second lowest number in the last 12 months and down 6% on September.

Many are also concerned about the near future due to the interest rate rise. In October, 31% of respondents said they would need to change their everyday spending patterns to cope with an increase in the base rate – and 27% indicated such an increase would affect their Christmas spending plans.

Paul Lockstone, managing director at Barclaycard, said: “Household expenditure remained muted in October and, when taking into account inflation, equated to a decline in real terms.
That said, last month many indicated an interest rate rise would affect their everyday spending.

“In light of the Bank of England’s announcement last week, it’ll be interesting to see how shoppers, who have so far demonstrated their resilience, continue to juggle the many demands on their budget. As we enter the run up to Christmas, Black Friday will be the first major opportunity to see whether consumers really do tighten their belts.”