Data from Barclays shows consumer credit and debit card spending grew only 1.9% year-on-year last month – significantly lower than the latest inflation rate of 4.2% and the smallest growth since September 2022. Face-to-face retail (excluding groceries) was a major contributor to this slowdown, contracting 2.2%, as people spent more time at home. However, concerns about inflation, rising food prices and increasing household bills eased, while confidence in non-essential spending reached a two-year high.
Essential items saw less growth (2.3%) than in January (4.2%), with lower prices at the pump leading to a fall in fuel spending (-12.2%). Meanwhile, spending on public transport increased just 3.8% – the smallest rise since March 2021 – as wet and icy weather combined with industrial action caused train cancellations and delays across the country.
Food price inflation dropping to its lowest level since April 2022 contributed to supermarkets (3.9%) and food and drink specialist stores (2.7%) seeing lower uplifts than in January (both 5.2%).
The deceleration in food inflation helped ease concern about rising grocery prices. While still high at 84%, this is the lowest figure recorded since Barclays started tracking this data point in December 2021.
The report notes that two-thirds (66%) of consumers are still looking for ways to get more value from, or to reduce the cost of, their weekly shop. To save money, 42% of this group have cut down on supermarket impulse buys, while a third (32%) is stocking up on their favourite or essential products when they are on offer. A further quarter (25%) is sticking to basic ingredients or cupboard stables – such as pasta, rice and vegetables – to prepare simple, cheaper meals at home.
Meanwhile, Barclays notes that recent supply chain disruption and the continuing impact of shrinkflation are front of mind for shoppers. Over half (51%) noticed supermarkets running out of stock in the last month, while 29% are specifically concerned about tea shortages, in light of reports of empty space on the shelves.
Concerns about the cost and size of products – owing to shrinkflation – remain high at 78%. As a result, 63% of consumers said that they would like to see the government taking action to intervene – for example, by mandating manufacturers disclose changes in content, volume or weight on product labels.
As consumers continue to pay close attention to their finances, over a third (36&) said they have noticed more examples of brands adding extra and hidden charges at the checkout when spending online, otherwise known as “drip pricing”.
This is most frequently spotted when paying for food delivery services (39%), airline tickets (32%) and live events (32%). In response, 68% welcome the government’s plan to ban unavoidable hidden fees, requiring businesses to disclose all costs upfront, as part of the Digital Markets, Competition and Consumers Bill (DMCC).
Close to four in 10 (37%) said drip pricing is their biggest shopping frustration when paying online, followed by auto-renewed subscriptions (30%), and altered or surged prices in response to demand – also known as dynamic pricing (28%).
Meanwhile, spending on non-essential items increased just 1.7% in February – the lowest growth since September 2022 – as wetter weather cast a cloud over multiple sectors and people spent more time indoors.
Face-to-face retail (excluding grocery shopping) and clothing stores saw declines of 2.2% and 1.0% respectively. Meanwhile, online retail (excluding groceries) grew slightly, up 1.2%, and occupied 56.2% of retail spending (excluding groceries), indicating that people chose to avoid the rain and shop online.
Takeaways and fast food increased 5.0% year-on-year, while digital content and subscriptions saw their highest growth (11.8%) since August 2021, spurred by new releases such as ‘One Day’.
More nights in led to a disappointing month for restaurants, contracting 13.4%, while growth in spending at bars, pubs and clubs was at its lowest level (1.1%) since September 2022.
Meanwhile, Barclays noted that consumers’ confidence in their ability to spend on non-essential items reached its highest point since November 2021 last month, at 59%. Concerns about inflation and rising household bills also softened to 84%, the most positive figures for more than two years – indicating that easing inflationary pressures are having a positive impact on household finances.
Karen Johnson, Head of Retail at Barclays, said: “February’s wet weather meant Brits chose to spend more time indoors, resulting in a slowdown in high-street and hospitality spending. This shift in behaviour meant insperiences enjoyed a boost, as consumers opted to enjoy cosy nights in with a TV show and a takeaway.
“At the supermarket, the majority of shoppers have noticed the impact of supply issues on stock, with tea shortages causing the most concern. Meanwhile, ‘drip pricing’ has topped the list of shopper bugbears, particularly when using food delivery services and buying airline tickets.
“With Brits having reined in discretionary spending during the winter months, and as inflationary pressures begin to ease, retailers will be hopeful that the onset of warmer weather lifts spending – particularly if consumer confidence improves in the summer.”
Jack Meaning, Chief UK Economist at Barclays, added: “We have continued to see encouraging signs of slowing price growth so far in 2024, particularly in the retail sector. Recent data shows shop price and grocery inflation decelerated significantly in February, as retailers offered shoppers discounts and promotional offers.
“This will be a welcome reprieve for consumers and a probable explanation of last month’s subdued card spending growth: while many people will have taken advantage of recent price promotions, they look to have held back on spending at least some of what they saved elsewhere.”
NAM Implications:
- i.e. Savvy shoppers are
- Cutting down on impulse buys
- Stocking up on their favourite or essential products on offer
- Sticking to basic ingredients or cupboard stables – such as pasta, rice and vegetables to prepare simple, cheaper meals at home
- It follows there is increasing concern re
- Shrinkflation
- Drip-pricing
- Availability
- Unit pricing
- Dynamic pricing
- The key problem is savvy shoppers voting with their feet vs awaiting government intervention.
- All because of the biggest casualty of Lockdown, trust…
