Consumer spending growth falls to lowest level in two years

Consumer spending growth slowed to just 1.6 per cent in March, its lowest level in two years, as consumers reined in purchases in nearly all categories.

The figure marked the third successive month of a spending slump and dragged down overall growth for the first three months of the year to 2.8 per cent – the worst performance in seven quarters.

According to the latest data from Barclaycard, which processes nearly half of all credit and debit card transactions in the UK, women’s clothing spend fell 1.2 per cent in March and family clothing flatlined at 0 per cent, as a wet and windy start to the month discouraged shoppers from updating their wardrobes for spring.

Garden centres also suffered from the unsettled weather with spending growth falling 3.5 per cent year-on-year. Travel spending slowed to 0.8 per cent from 5.1 per cent in February, which saw a pre-Easter spike in bookings. This was the lowest level of growth for the category since June 2014.

Consumers who stayed in the UK continued to treat themselves and their families, however, with pubs and restaurants two of a small number of categories to maintain a strong level of growth in March, both up 11.9 per cent, boosted by Easter and Mother’s Day.

Cinema spend was the star performer, climbing 12.8 per cent, helped by the release of Batman v. Superman and the continuing popularity of Zoolander No. 2 and Deadpool.

Nearly one in two (47%) say they have been more cautious with their spending during the past few months, reflected in Barclaycard data which saw non-essential spending grow at 2% in March – the lowest rate in more than two years.

Subdued wage growth is also having an impact on consumers’ outlook. Average real earnings are about 6 per cent below their 2008 level and just one in four (26 per cent) is confident that their personal spending power will rise during the rest of the year.

Paul Lockstone, managing director at Barclaycard said: “Since the turn of the year we have seen a steady fall in the rate of spending growth, but the continuing impact of global economic headwinds and an uncertain outlook really caught up with consumer spending in March. Spend on non-essential items grew at the slowest rate since 2014, while the emerging trend for compartmentalisation in the weekly shop, with people willing to mix and match between discount stores and more established high street retailers, suggests shoppers continue to place a premium on value for money.

“Some sectors did show encouraging signs, however – notably entertainment and leisure – as consumers continued to spend on experiences, often with loved ones or their families. Looking ahead, it’ll be interesting to see whether shoppers continue this trend, particularly if confidence in the economy continues to wane.”