Summer upturn on cards after spring flash crash?

05 Feb 2024

January is looking like it was another tough month for UK consumer spending. According to the latest ONS/Bank of England figures for debit and credit card spending, it might be down as much as 3% on the same time last year. “Delayable” outlays – including clothing and homewares – are, unsurprisingly, being delayed, with falls of around 8% on 2023. Instead, what growth is taking place is due to “staples” like food and utility bills. The numbers sample just 100 companies, but even so, the downward trend is very strong and it will be a big surprise if January turns out to have been a buoyant month.

What’s driving it is a collapse in growth of household net incomes, with a slowing jobs market leading to lower pay rises for workers and more and more mortgages being renewed at higher interest rates, punching a great big hole in people’s budgets as they seek to keep a roof over their heads.

So the slowing spending figures are echoing what’s happening in net incomes. After a comparatively strong start to last year, it’s been downhill most of the way.

ConsumerCast’s latest figures make this clear. February and March 2024 are going to be the worst months for UK consumer finances. But there is relief in sight: by June and July, the worst of the mortgage increases will be over and disposable income growth will be recovering. Retailers and other consumer brands should plan for this shift. Waiting to discount seasonal ranges till shoppers have more cash in the bank is likely to be a winning strategy in 2024, as is a move to more premium products and experiences later in the spring/summer season. For more details, look out for ConsumerCast’s 2024 UK Household Outlook report.