Non-essential spending growth hits 18-month low in March, but cinemas and pubs benefit

Consumer card spending growth flatlined in March, on par with February’s 1.9 % uplift, and significantly less than the latest CPIH inflation rate of 3.8 %. This was largely due to a slowdown in non-essential spending, which saw its smallest increase (1.6 %) since September 2022, as wet weather dampened both retail and restaurant sales. However, encouragingly, new data sourced from millions of Barclays current accounts* reveals growing stability in UK housing costs.

Retail spending remained almost flat at 0.7 %, brought down by falling in-store spending. Face-to-face retail (excluding groceries) was down -2.1 % and clothing fell -1.8 %, as spring showers deterred shoppers from visiting the high street. Meanwhile, restaurants had another challenging month, down -12.6 %, consistent with the fall witnessed in February (-13.4 %).

This comes as 45 % of consumers say they are continuing to rein in discretionary spending, with the majority (53 %) of this group cutting back on clothing and accessory purchases, and nearly half (47 %) spending less on dining out.

“No-spend” challenges emerge as latest thrifty trend

After reaching its highest point since November 2021 in February (59 %), consumers’ confidence in their ability to spend on non-essential items slipped to 55 % in March.

The slowdown in discretionary spending can also be attributed to the rise of the “no-spend” challenge, which involves consumers refraining from making non-essential purchases, such as takeaways, coffees and clothes, and instead prioritising essentials, such as food, childcare and utilities.

Almost a quarter of Brits (23 %) have participated in, or would consider participating in, a “no-spend” challenge. When asked about the most effective “no-spend” tactics, almost half (45 %) listed cooking more at home, while having clearly defined goals (such as saving for a holiday or building an emergency fund) and planning expenses in advance (37 % and 36 % respectively) also proved popular.

Dune: Part Two spurs cinema spending 

Cinemas enjoyed their busiest day of the year so far on Saturday 2^nd March, right after the UK release date for Dune: Part Two – 2024’s biggest grossing film – with spending 87 % higher compared to the average across the month.

On another positive note, pubs, bars and clubs saw stronger growth than in February, at 3.2 % compared to 1.1 %, as punters gathered to watch Six Nations and FA Cup fixtures, and to celebrate St Patrick’s Day.

Subdued supermarket sales

Spending on essential items grew 2.4 %, close to February (2.3 %). This was propped up by a noticeable recovery in fuel (-7.1 %) compared to February (-12.2 %) owing to petrol and diesel price increases.

Grocery spending, up just 2.7 %, recorded its slowest growth since September 2022, due to falling food price inflation, which reached its lowest level (5.0 %) since January 2022. Despite this, concerns about general inflation have risen to 87 %, after hitting a record low last month (84 %). Consumers are also increasingly concerned about the impact of shrinkflation, at 80 % versus 78 % the previous month.

Settling down: UK mortgage and rental payments stabilise

Encouragingly, new data sourced from millions of Barclays current accounts reveals growing stability in UK housing costs. Last month, Brits spent just 1.8 % more on mortgage and rental payments than they did in March 2023. This was far below the 12.2 % increase recorded in June 2023 (when growth was at its highest), and the lowest year-on-year increase on file since March 2023.

However, not all consumers are back on solid ground – one in six (16 %) aren’t confident about their ability to meet their mortgage or rental payments, and 18 % of those with  mortgage/rent payments are adjusting their spending habits to cope with rising housing costs. More broadly, consumers’ confidence in their general household finances remained steady in March, at 67 %.

To generate additional income, a relatively small percentage of homeowners (3 %) have started renting out a room in their house in the past year. However, this figure rises to 12 % for homeowners in London. More broadly, household spending (e.g. DIY and electronics) fell -5.2 % in March, with one in six (16 %) holding off home renovations due to current economic pressures.

Meanwhile, many renters say they’re losing out because demand is outpacing supply; 22 % feel there is too much competition for rental properties in their area, resulting in less value-for-money.

Karen Johnson, head of retail at Barclays, said: “Retailers were braced for a more subdued start to 2024, and recent figures are in line with expectations. The wet weather has been a key factor in the slowdown in discretionary spending, as it’s meant fewer visits to the high street and to hospitality venues.

“However, in spite of this initial lull, many retailers are confident that spending will rebound in the coming months, particularly in anticipation of better weather, the energy price cap drop, an uplift in the National Minimum Wage, and the buzz around major events such as Taylor Swift’s Eras Tour and the Paris 2024 Olympics.”

Mark Arnold, head of savings & mortgages at Barclays UK, said: “Non-essential spending is still reeling from last year’s spike in housing costs, which caused both homeowners and renters to cut back while looking for additional sources of income – such as delaying renovations and renting out spare rooms.

“However, there are reasons to be optimistic – our data shows that housing costs are stabilising, the inflationary tide is easing, and interest rates are predicted to fall over the coming months, all of which should translate into increased consumer confidence and spending.”

Jack Meaning, chief UK economist at Barclays, said: “While still only tentative, the signs that the UK economy is expanding into 2024 continue to build. With an expectation that the Bank of England will cut interest rates from June, and banks responding by reducing mortgage rates, our research suggests that the housing costs that have been a drag on consumers for over a year are on the cusp of a turn, and will become a boost to spending from H2 and beyond. Today’s data shows this transition happening in real time.”

Overall growth figures