A new report has found that consumers treating themselves to restaurant meals and holidays are making a significant contribution to growth in consumer spending.
The January consumer spending report from Barclaycard has found that UK consumer spending increased by 3.2% in the first month of 2015. The report attributes the healthy increase to higher wage growth and falling prices.
The data from Barclaycard, which processes nearly half of all of the UK's credit and debit card transactions, shows that the increase in spending was not evenly distributed amongst different types of products. Spending on non-essential items grew at 3.5%, whereas spending on essential items (supermarket shopping and petrol) grew by only 0.4%. This points to growing consumer confidence and willingness to splash out on a treat for themselves and their families.
Restaurants and other eateries were a major beneficiary of British consumers’ increasing tendency to treat themselves. Spending in restaurants was up by 17.4%, driven by a 23.5% increase in the volume of transactions. Interestingly, this implies that the value of transactions actually fell by five per cent, possibly due to eating out regularly making it feel less extravagant as an event. Takeaways also benefited, with online ordering growing by a whopping 52.3%.
Another beneficiary of UK consumers' largess has been travel agencies; with spend on online holiday bookings growing by 12%. Growth in spending on hotels was also up by an impressive 8.2%. Travel spending also grew strongly during the last quarter of 2014, partly due to decreasing fuel prices helping to hold down the price of flights.
The cold weather during January caused a surge in clothing purchases, with spending up by 7.4%. Spending on clothing at department stores increased by 5.8%, while online clothing spend jumped by 17.4%. In part, this may have been driven by consumers choosing to delay their winter clothing purchases due to the unseasonably warm weather during the last quarter of 2014. Spending on clothing during the final quarter of 2014 grew by a relatively modest 4.3%.
When adjustments are made for weather conditions, the growth in consumer spending during January was a full percentage point higher than at the same point in 2014. January was the seventh month in a row where the increase in consumer spending was greater than three per cent, a fact that is making a significant contribution to the UK's economic growth.
Barclaycard's quarterly "Where's Britain Spending?" report found that this growth is likely to continue into 2015. 31% of respondents expect to become more financially confident in 2015, with 30% expecting increased income.
In spite of the extra spending, consumers do not appear to be taking on unsustainable debt. The British Bankers' Association has found that overdrafts are down by 10% compared to 2013 and interest-bearing credit card debts are down 4% year on year.
This article was brought to you in association with Barclaycard