UK consumer spending growth has slowed to 2.6% and 2.5% respectively in October, marking the lowest annual increase in over a year, according to recent data from Barclays (LON:) and the British Retail Consortium (BRC). This deceleration is attributed to high inflation, which stood at 6.7% in September, and a series of interest rate hikes by the Bank of England.
The Bank of England has been systematically raising interest rates until August this year, aiming to maintain them at a record high for the past 15 years to combat inflation. This move comes despite the bank’s forecast of economic stagnation and the acknowledgment that only half of the effects of its rate hikes have been experienced so far.
Esme Harwood, a director at Barclays, noted that many consumers are curtailing non-essential purchases to save for Christmas and anticipated winter fuel bills. This trend was also evident in the BRC data, which showed a 1% fall in non-food spending as many households delay Christmas shopping for Black Friday sales.
However, certain sectors saw an uptick in spending. The Rugby World Cup spurred a 5.9% increase in expenditure at pubs, bars, and clubs. Similarly, late October witnessed increased demand for autumn and winter outdoor clothing while food spending rose by 7.9%, according to BRC.
BRC Chief Executive Helen Dickinson pointed out that these trends were influenced by anticipation of Black Friday sales and increased demand for seasonal clothing. A survey of 2,000 households further reinforced these observations, revealing that 37% expected to spend less on Christmas due to higher day-to-day bills.
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