Consumer spending jumped in April, but this was more the result of a late Easter and rising inflation than growing consumer confidence, surveys out today have shown.
The British Retail Consortium signaled that the spike in spending should be taken with a pinch of salt as people spent money mostly on essentials like food and petrol, but remained cautious otherwise amid rising prices.
Consumer spending rose 5.5 per cent last month, with essential spending jumping 11.4 per cent, partially due to an ‘Easter bounce’ in supermarket spending and another strong month for petrol, Barclaycard said.
Cautious: Britons spent mostly on essentials like food and petrol in April
Although April’s festivities and bank holidays saw people spending more on meals out, non-essential spending only increased by 3.7 per cent, suggesting that Britons are reining in on extras as rising inflation eats into their
Paul Lockstone, managing director at Barclaycard, said: ‘A late Easter and rising prices provided a superficial boost to spending in April, but behind the headline figure it’s clear consumers are recognising and responding to the inflationary pressures being placed on household budgets.’
‘Despite growth across a number of categories, the spending picture in real terms is one of growing caution, as seen by declining confidence levels amongst the UK’s consumers.’
The proportion of consumers feeling confident in their household finances dipped 14 percentage points to 56 per cent from 70 per cent in March – with two-thirds of Brits saying they are focusing more on getting value for money on purchases, according to the report.
Britons have seen a boost in their spending power in recent years thanks to low inflation and falling petrol prices. But the tide turned last year, when oil prices started to rise again and Brexit sent the pound diving, making imports more expensive and hence driving inflation higher.
Inflation hovered around zero for most of 2015 and the first half of 2016, but has been rising since Britons voted to leave the EU last June, to hit 2.3 per cent in March. It is expected to rise further in the coming months.
Meanwhile, retail sales figures from the BRC and KPMG paint a similar picture. In April, like-for-like retail sales increased by 5.6 per cent compared to a year earlier, when they had decreased 0.9 per cent.
Rising cost of living: Inflation has been rising since Britons voted to leave the EU last June
But the BRC said the figure was distorted by the timing of Easter and that the outlook wasn’t ‘as rosy’ as there were ‘long-term signs of a slowdown’.
BRC chief executive Helen Dickinson said: ‘Although today’s figures do indicate that consumers are still willing to spend, with a cocktail of rising costs and slowing wage growth as the backdrop, conditions for consumers will get tougher.’
Paul Martin, UK head of retail at KPMG, said: ‘April’s sales provided a brief period of respite for retailers following a relentless start to the year. However, much of the rise was driven by the timing of Easter and the growing inflationary pressures the sector is facing, rather than a sudden upswing in consumer confidence.’
The figures add to signs of a slowing economy as consumers are not spending as much as they did in previous years.
Car sales plummeted 20 per cent last month, retail sales slid in March by more than forecasters expected, while house prices fell in the three months to April, marking the first drop since November 2012.