Financial News: UK Consumers Turn Cautious On Christmas Spending

UK Consumers Turn Cautious On Christmas Spending

(RTTNews) - UK grocery price inflation fell to single digits for the first time since July last year, but consumers are likely to continue feeling the pinch, a survey from the market research group Kantar showed Tuesday.

Separate surveys from the BRC and Barclays also showed that consumers are tightening their purse strings as they head into the Christmas shopping season as the high cost of living hurt their spending. Grocery price inflation slowed to 9.7 percent for the four weeks to October 29, Kantar said. Inflation was 11 percent in the previous report.

Grocery price inflation returned to single digits after 16 months of double digit growth. "While the drop to 9.7 percent is positive news and something of a watershed, consumers will still be feeling the pinch," Fraser McKevitt, head of retail and consumer insight, at Kantar, said.

"We're only seeing year on year price falls in a limited number of major categories including butter, dried pasta and milk."

During the same four-week period, take-home grocery sales grew by 7.4 percent year-on-year. Consumer spending on promotions hit 27.2 percent of total grocery sales - the highest level since Christmas last year, Kantar said.

Elsewhere, survey data from the British Retail Consortium suggested that consumers are turning more cautious on spending amid the rising cost of living.

Data from the BRC-KPMG survey, released on Tuesday, showed that retail sales annual growth eased to 2.5 percent in October from 2.7 percent in September. Food sales grew 7.9 percent year-on-year in the three months to October, while non-food sales shrunk 1.0 percent.

"Whilst consumers are now operating in a lower inflationary environment compared to October last year where inflation peaked at over 11 percent, there is no doubt that the last 12 months have taken a toll on confidence and their ability to spend," Paul Martin, UK head of retail at KPMG, said.

"Coupled with a higher interest rate environment, dwindling covid savings and the heating coming back on, beleaguered consumers are thinking very carefully about how they spend their money."

Spending levels are expected to be much more muted this year and the run up to Christmas could be the most challenging one seen since pre-pandemic days, Martin added.

The Barclays survey showed that consumer card spending grew just 2.6 percent year-on-year in October, which was the smallest gain September last year, when it rose 1.8 percent.

Rising energy bills and Christmas costs were to blame for the decline in discretionary spending, Barclays said. The unreasonably warm weather in October delayed new clothing purchases, the bank added.

However, the Rugby World Cup boosted sales at pubs and bars for the second month in a row and the travel sector performed well as holiday bookings climbed.

Spending on non-essential items rose only 2.0 percent, which was the weakest gain since September 2022. Almost half, 47 percent, of consumers plan to reduce discretionary spending to cope with higher energy bills throughout the autumn and winter. Most common cut-backs included ordering takeaways, eating out at restaurants, and buying new clothes and accessories for day-to-day wear. UK consumers are pulling back from discretionary spending and increasingly worried about their future ability to spend, Jack Meaning, chief UK economist at Barclays, said.

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