The summer heatwave, along with the ‘sweet treat economy’ pushed card spending to return to growth in August, although it remained below consumer inflation.
Card spending grew by one per cent in August, below the CPIH inflation rate of 3.1 per cent.
Almost half of consumers said they continued to spend on small, luxury purchases like baked goods even when trying to make cutbacks.
The demand for little luxuries also bolstered pharmacy, health and beauty retailers, with this sector reporting 7.3 growth month on month. It was the highest figure since January 2023 in yet more evidence of the ‘lipstick effect’ where consumers continue to prioritise cosmetics even as budgets tighten.
Spending on groceries rose 1.9 per cent, the highest growth since March, while butchers and delicatessens saw growth of 5.1 per cent.
Nearly half of Brits said they have been prioritising buying raw or whole-food ingredients to prepare fresh meals and snacks, in order to avoid ultra-high-processed foods.
Karen Johnson, head of retail at Barclays, said: “The long-awaited British summer has unlocked pent-up demand across a number of retail categories, such as garden centres and butchers, as many Brits dusted off their barbecue for the first time this year.
“We’re also seeing an emerging trend of consumers indulging in retail therapy for mood-boosting pick-me-ups, often in the form of sweet treats and cosmetics. This is a much more immediate version of the long-running trend of consumers making room in their budgets for memorable experiences, like tickets for next year’s Oasis tour, which went on sale over the weekend.
Consumer confidence remained unchanged at a three-year high in August, despite a worsening outlook for the broader economy.
Retail returns to growth
The retail sector returned to growth for the first time since March this year, while brick-and-mortar businesses were buoyed by the ongoing resurgence of in-store shopping.
More than half of all credit and debit card spending in August was conducted face-to-face, the highest level so far this year, after good weather encouraged Brits outside.
Card spending at clothing retailers, however, declined by 1.7 per cent, after falling by 2.3 per cent in July.
“Clothing remains one of the most common areas where discretionary spending is reined in,” Barclays said, adding that of the 46 per cent of Brits who said they’re planning to make cutbacks, 53 per cent said they’ll spend less on clothing and accessories.