The key chart
The key message
Despite accumulating close to £160bn in excess savings during the pandemic, UK households (HHs) appear reluctant to “bash their plastic”.
All categories of credit and debit card payments – delayable, social, staples and work-related – have recovered strongly during 2021. Unsurprisingly, the biggest increases have occurred in social and work-related payments with the easing/lifting of restrictions. Aggregate payments peaked at 106% of pre-pandemic levels on 5 May 2021, however, and have been trending slightly below pre-pandemic levels ever since.
HHs have been spending more on getting to work recently than on delayable items such as clothing and food, with the recent fuel shortages creating an additional, albeit temporary spike, in the former type of spending.
Significantly, delayable spending peaked at 121% of pre-pandemic levels a week after the lifting of restrictions on the opening of non-essential stores on 12 April 2021 and have fallen back to 92% of pre-pandemic levels now. This matters because spending on delayable goods is a useful indicator regarding the extent to which excess savings are returning to the economy via HH consumption in a sustained fashion.
The on-going message from the money sector here is that while the direction of travel in HH consumption has been positive YTD, momentum has slowed. This is consistent with historical evidence that suggests (1) that HHs take time to respond to shocks, (2) that unanticipated increases in HH wealth tend to be saved rather than spent; and (3) that excess savings were built up by HHs with relatively low marginal propensities to consume.
The six charts that matter
Despite accumulating close to £160bn in excess savings during the pandemic (see chart above), UK households (HHs) appear reluctant to “bash their plastic”.
All categories of credit and debit card payments – delayable, social, staples and work-related – have recovered strongly during 2021 (see chart above). Unsurprisingly, the biggest increases have occurred in social and work-related payments with the easing/lifting of restrictions (see chart below).
Aggregate payments peaked at 106% of pre-pandemic levels on 5 May 2021, however, and have been trending slightly below pre-pandemic levels ever since (see chart below).
HHs have been spending more on getting to work recently than on delayable items such as clothing and food, with the recent fuel shortages creating an additional, albeit temporary spike, in the former type of spending (see chart below).
Significantly, delayable spending peaked at 121% of pre-pandemic levels a week after the lifting of restrictions on the opening of non-essential stores on 12 April 2021 and have fallen back to 92% of pre-pandemic levels now (see chart below). This matters because spending on delayable goods is a useful indicator regarding the extent to which excess savings are returning to the economy via HH consumption.
Conclusion
The on-going message from the money sector here is that, while the direction of travel in HH consumption has been positive YTD, momentum has slowed. This is consistent with historical evidence that suggests (1) that HHs take time to respond to shocks, (2) that unanticipated increases in HH wealth tend to be saved rather than spent; and (3) that excess savings were built up by HHs with relatively low marginal propensities to consume.
Please note that the summary comments and charts above are extracts from more detailed analysis that is available separately.