March brought with it a stagnation in consumer card spending growth, echoing February’s modest uplift, according to recent analysis by Barclays. Despite this, the latest figures reveal a notable disparity compared to the current Consumer Prices Index including owner occupiers’ housing costs (CPIH) inflation rate of 3.8 per cent.

The data underscores a near-flat trajectory in retail spending, standing at a mere 0.7 per cent increase, largely influenced by a decline in in-store purchases. Notably, face-to-face retail transactions, excluding groceries, experienced a notable downturn of -2.1 per cent, with clothing sales plunging by -1.8 per cent, attributed to inclement weather deterring high street foot traffic. The hospitality sector continued to face challenges, with restaurant spending dropping by -12.6 per cent, mirroring February’s decline (-13.4 per cent).

A significant portion of consumers, constituting 45 per cent, remain cautious, continuing to tighten their belts on discretionary spending. The majority within this cohort (53 per cent) have curtailed clothing and accessory purchases, while nearly half (47 per cent) have reduced spending on dining out.

Consumer confidence in discretionary spending, which peaked in February at 59 per cent, receded to 55 per cent in March. This dip aligns with the growing popularity of the “no-spend” challenge, where participants abstain from non-essential purchases, favoring essential expenditures like food and utilities. Approximately 23 per cent of Britons have participated in or considered this challenge, citing cooking at home and setting clear financial goals as effective strategies.

Despite the sluggish growth in discretionary spending, essential spending saw a modest uptick of 2.4 per cent, nearly matching February’s 2.3 per cent increase. Noteworthy within this category is the resurgence in fuel spending, rising by -7.1 per cent compared to February’s -12.2 per cent, attributed to escalating petrol and diesel prices.

Meanwhile, concerns surrounding general inflation have heightened to 87 per cent, reflecting apprehension about shrinkflation’s impact, with 80 per cent expressing worry. Encouragingly, housing costs have exhibited signs of stability, with March witnessing a marginal 1.8 per cent increase compared to the previous year.

However, challenges persist, with 16 per cent of consumers expressing uncertainty about meeting mortgage or rental payments, prompting 18 per cent to adjust their spending habits. Renters, in particular, bemoan the scarcity of affordable rental properties, with 22 per cent citing heightened competition.

In response to these dynamics, Karen Johnson, Head of Retail at Barclays, remains optimistic, foreseeing a rebound in spending bolstered by forthcoming events and economic factors. Mark Arnold, Head of Savings & Mortgages at Barclays UK, echoes this sentiment, highlighting signs of stabilization in housing costs and easing inflation.

With anticipation of interest rate cuts and reduced mortgage rates, Jack Meaning, Chief UK Economist at Barclays, predicts a turning point for housing costs, potentially igniting consumer spending in the latter half of the year.

As consumers navigate economic uncertainties, cautious optimism prevails, underpinned by evolving spending patterns and market dynamics poised for a transformative shift.

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Last Update: April 9, 2024