Consumers took to autumn in buoyant fashion, spending more on everything from restaurant trips to a round in the pub last month, as a combination of increasing wages and falling prices combined to lift households’ fortunes.
Retail spending recovered from a late-summer lull to grow 4.1% year-on-year in October, according to the latest data from Barclaycard and a recent report via Casual Dining, which processes nearly half of all credit and debit card transactions in the UK. However, the headline number masked a clear distinction between spending on essential and non-essential items.
Essential spending fell by 3.1%, its worst performance since March 2014, led by a fall in supermarket spending which was down 0.9% compared to last year – its worst performance in 19 months.
Households continue to benefit from falling prices and rising wages. September’s inflation rate was pulled down by lower food prices, which dropped 2.5% in the prior 12 months, as supermarket price wars affected the grocery industry, according to the Office for National Statistics. This, combined with falling petrol prices – diesel is at its lowest level since December 2009 – has acted as a ‘de facto tax cut’ for households. Kantar Worldpanel found last month that the supermarket price war was saving each household £58 on average. Meanwhile, in the three months to August, total earnings were up 3% from a year earlier.
Consumers have used this windfall on discretionary items such as eating out, travel and clothing. ‘Non-essential’ spending increased by a tenth to 6.6% in the month – from 5.8% in September, and is higher than at any point in 2014. Welcome news for casual dining restaurants.