UK Consumer Spending Growth Slows Amid Inflation and Interest Rate Hikes

UK consumer spending growth has slowed to 2.6% and 2.5% in October, marking the lowest annual increase in over a year, according to recent data from Barclays and the British Retail Consortium (BRC). This deceleration is linked to high inflation, which was at 6.7% in September, alongside a series of interest rate hikes by the Bank of England.

The Bank of England has been persistently increasing interest rates until August this year, seeking to maintain them at a record high for the past 15 years to tackle inflation. This approach is being taken even as the bank forecasts economic stagnation and notes that only half of the impacts of its rate hikes have been felt so far.

Esme Harwood, a director at Barclays, highlighted that many consumers are cutting back on non-essential purchases to save for Christmas as well as anticipated winter fuel expenses. This pattern was reflected in the BRC data, which recorded a 1% decline in non-food spending as numerous households postpone Christmas shopping for Black Friday promotions.

Nonetheless, some sectors experienced a boost in spending. The Rugby World Cup resulted in a 5.9% rise in expenditure at pubs, bars, and clubs. Additionally, late October saw increased demand for autumn and winter outdoor clothing, while food spending surged by 7.9%, according to the BRC.

Helen Dickinson, Chief Executive of the BRC, noted that these trends were influenced by expectations surrounding Black Friday sales and a heightened demand for seasonal clothing. A survey of 2,000 households supported these insights, revealing that 37% anticipated spending less on Christmas due to rising daily expenses.