Data from Barclaycard has revealed that consumer spending growth slowed to 2.4% year-on-year in October which, with inflation at 3%, equated to a contraction in real terms.
However, the pub and restaurant sector remained strong at 10.2% and 11.8% respectively.
Barclaycard revealed that spending on essentials (2.9%) outstripped discretionary spend growth (2.2%) for the second month running.
This slowdown in expenditure on ‘nice-to-haves’ was driven by a significant contraction in clothing spend (-4.1%), and consumers also reined in their spending on entertainment (7.9%) which dropped below the 10.3% average recorded for 2017 to date.
Brits had a gloomy outlook on the UK economy, with just 31% expressing confidence. Many were also concerned about the near future, and the recent interest rate rise was likely to prompt them to make additional adjustments, Barclaycard said.
In October, three in 10 (31%) said they would need to change their everyday spending patterns to cope with an increase in the base rate – and just over a quarter (27%) indicated a hike would put a dampener on their Christmas spending plans.
“Household expenditure remained muted in October and, when taking into account inflation, equated to a decline in real terms. This is a reflection of consumers paring back to cope with their reduced spending power, a tactic which, for the moment, has given them confidence in their ability to manage their household finances,” said Paul Lockstone, managing director at Barclaycard.
“That said, last month many indicated an interest rate rise would affect their everyday spending. In light of the Bank of England’s announcement last week, it’ll be interesting to see how shoppers, who have so far demonstrated their resilience, continue to juggle the many demands on their budget.”