The key chart
The key message
UK households (HHs) are delaying their spending on so-called “delayable” goods such as clothing and furniture. This matters for two reasons:
- First, spending on delayable goods is our preferred proxy for the return of the excess savings built up during the pandemic to productive use;
- Second, a key assumption in the latest OBR forecasts for the UK economy and public finances is that HHs will run down their excess savings (and increase their borrowing) to fuel consumption in the face of declining real wages.
The message from the money sector so far this year is that UK aggregate spending is recovering steadily but the sustainability of consumption remains unproven. HHs are spending more on getting to work, for example, but less on buying clothes, furniture and other durable goods.
In short, the accumulation of excess savings may have slowed but we await further evidence that these savings are being run down to support sustained consumption as the OBR expects.
Delaying the delayable in charts
UK households (HHs) are delaying their spending on so-called “delayable” goods such as clothing and furniture. According to the latest ONS real-time indicators, credit and debit card purchases on delayable goods in the week to 17 March 2022 were 82% of their February 2020 average (see chart above). This means that delayable spending is currently the weakest segment of HH spending. Spending on work-related, staples, and social goods and services are currently 17%, 9% and 5% above pre-pandemic levels (see chart below).
This matters for two reasons. First, spending on delayable goods is our preferred proxy for the return of the excess savings built up during the pandemic to productive use. Second, and related to this, a key assumption in the latest OBR forecasts for the UK economy and public finances is that HHs will run down their excess savings (and increase their borrowing) to fuel consumption in the face of declining real wages (see “Good news for Rishi, but…”).
The message from the money sector so far this year is that UK aggregate spending is recovering steadily (see chart above) but the sustainability of consumption remains unproven. HHs are spending more on getting to work, for example, but less on buying clothes, furniture and other durable goods (see chart below).
In short, UK HH’s accumulation of excess savings may have slowed but we await further evidence that these savings are being run down to support sustained consumption as the OBR expects.
Please nore that the summary comments and charts above are extracts from more detailed analysis that is available separately.