The key chart
The key message
The message from the UK money sector remains one of resilient consumer spending, despite rising inflation and falling real incomes. UK households are reallocating their spending towards getting to work and staple items at the expense of spending on delayable goods and socialising, rather than reducing spending entirely. This matters because household spending accounts for 60p in every pound of UK output. The recent recovery in spending on delayable goods since mid-August is also a positive sign, although this key indicator of excess savings returning to the economy remains below pre-pandemic levels.
Re-allocating rather than reducing
In recent presentations on the outlook for UK and euro area household dynamics and consumer credit, I noted that households typically either reduce their spending and/or reallocate their spending in the face of rising energy prices. The latest ONS data on card payments suggests that UK households are still “re-allocating rather than reducing”. In other words, inflation and falling real incomes are affecting spending patterns more than overall spending levels, at least so far…
- Aggregate spending in the seven days to 1 September 2022 was the same as pre-pandemic levels (see key chart above) and 22ppt higher than at the end of December 2021 (see chart immediately above).
- Spending across all categories – delayable, social, staple and work-related goods – has risen YTD most notably, if not unexpectedly, in the case of work-related spending.
- Work related spending is currently 38ppt above pre-pandemic levels reflecting the impact of rising fuel prices. In contrast both spending on delayable goods such as clothing and furniture and on socialising remain below pre-pandemic levels.
Please note that the summary comments and chart above are extracts from more detailed analysis that is available separately.