Card spending returns to growth in May, as consumer confidence begins to show signs of recovery

• Confidence in the UK, European and global economies all climbed, and concerns about rising energy, fuel and food prices began to ease
• Both essential and non-essential spending grew marginally, up 0.7 percent and 0.9 percent respectively
• Entertainment grew 5.8 percent, supported by box office hits such as The Devil Wears Prada 2 and The Sheep Detectives
• Travel spending fell -5.8 percent, marking its third month of decline, with airline spending down -12.9 percent
• The Barclays Consumer Spend report combines hundreds of millions of customer transactions with consumer research to provide an in-depth view of UK spending

Consumer card spending grew 0.8 percent year-on-year in May, up from April’s -0.1 percent decline, but still below the latest CPIH inflation rate of 3.4 percent. Essential spending climbed 0.7 percent, led by an 11.9 percent increase in fuel spending, while non-essential spending returned to growth, at 0.9 percent, after falling -0.3 percent last month.

Consumer confidence in the UK, European and global economies all rebounded in May, returning to the levels seen at the beginning of the year, after declining in March and April.

Consumers’ confidence in their household finances and ability to live within their means improved one percentage point each, to 65 percent and 70 percent respectively, while consumers’ confidence in their ability to spend on non-essential items grew to 52 percent (up from 49 percent).

Concerns about the impact of the Middle East on costs remain high, but have eased month-on-month, with a lower proportion of consumers concerned about rising energy bills (83 percent, down from 85 percent) and food prices (82 percent, down from 84 percent).

Consumers cut costs and build savings buffers to manage uncertainty

Two in three (65 percent) are making financial adjustments in response to current uncertainty, with this group limiting non-essential purchases (45 percent), takeaways and meals out (42 percent) and energy use at home (38 percent).

Of those making the effort to cut discretionary spending, 35 percent say their top reason for doing so is to offset an increase in essential costs, while 34 percent cited building a savings buffer as their main motivation.

Entertainment returns to growth

Entertainment spending grew 5.8 percent in May, after declining -0.6 percent in April, supported by the box office success of the long-awaited sequel The Devil Wears Prada 2, as well as The Sheep Detectives and Michael.

Digital content and subscriptions continued to perform strongly, rising 12.8 percent year-on-year, its highest growth since August 2021. This was supported by popular series including Rivals Season 2, Euphoria Season 3 and Off Campus, as well as the final matches of the Premier League and UEFA Champions League, with some matches streamed online.

Airline uncertainty slows international travel

Travel spending fell -5.8 percent, marking its third consecutive month of decline, with holidaymakers still taking a wait-and-see approach to their summer plans amid ongoing uncertainty. Airline spending led was down -12.9 percent, suggesting consumers are putting off international travel. A fifth say they are taking a staycation this year, driven by convenience (46 percent), a preference for UK trips (35 percent), cost (33 percent) and a desire to avoid air travel (30 percent).

May’s sunny weather and the early bank holiday supported several seasonal categories, with food and drink specialist stores up 4.0 per cent, and health and beauty rising 5.0 percent. Both furniture stores (6.4 percent), and hotels and accommodation (2.7 percent) returned to growth, after declining in April (down -0.9 percent and -2.4 percent respectively).

Julien Lafargue, Chief Market Strategist, Barclays Private Bank and Wealth Management, said: “May’s data offers an early sign that household demand may be stabilising, but the macro backdrop remains finely balanced. The key question now is whether improving confidence can be sustained, particularly if inflation remains sticky and interest rates trend higher.”

Karen Johnson, Head of Retail at Barclays, said: “The warmer weather and first May Bank Holiday gave consumers more reasons to spend in May, particularly on seasonal essentials, UK breaks and affordable ways to enjoy time with family and friends. Shoppers are still being careful, with many continuing to build savings and managing subscriptions more closely, but they are also finding room in their budgets for the things that feel good value, convenient or worth prioritising.”

Image courtesy of Unsplash. Photo credit: Stephen Phillips – hostreviews.co.uk.