Consumers are still erring on the cautious side when it comes to spending their hard-earned cash, with many searching out cheaper deals or cutting back altogether.
According to research from Barclaycard, consumer spending slowed to its lowest level in 14 months in March, up just 1.1% year-on-year and below the rate of inflation for the first time in six months.
Despite improving employment figures and inflation falling to 1.7%, people's wages are not increasing in line with growth and are stuck at 1.4%, meaning many household budgets are being tightly squeezed. Add to this the fact that household costs have been increasing, with bills up 3%, and many more people taking that step onto the property ladder meaning any expendable income they may have been enjoying is now going into running a house, and it seems people have less money to spend on the high street.
Unnecessary items are having to take a back seat as people struggle to make their monthly budgets cover the essentials and, when they do want to treat themselves, consumers are now going online to seek out cheaper deals. The high street is being shunned in favour of the internet, with in-store spending down 0.3%, it's lowest level of growth since January last year. If you take into account the fact that last year people were tackling freezing temperatures, whereas this year the weather has been inviting people to get out and about, this comes as an even bigger blow to the high street. Online shopping, although continually outpacing the high street, is also showing its slowest rate of growth since the end of 2011, at 6.4%.
It seems consumers are even having to cut back on the essentials such as groceries, with growth in supermarket spending down 2.6% compared to last year. The average value of each grocery transaction was also down 9.1%, suggesting people are either denying themselves some luxuries or buying cheaper supermarket brands.
Spending on petrol reported an 8.1% fall, with part of this decrease being explained by forecourt prices currently at their lowest in three years, but the number of actual transactions are down by 3%, suggesting consumers are cutting back on their car use. Public transport seems to have been the winner seeing a 9.1% growth in spending on the likes of the bus and train.
With consumers cutting back in many areas, it seems they are unwilling to give up certain entertainment luxuries, with restaurant spending growing by 11%, while it seems that looking smart is still viewed as an essential, with spending on clothing remaining strong, rising 9.9% and posting its second best performance of the last two years.
The unseasonably clement spring weather has seen a surge in DIY spending, which is up 16.6% and at its highest for two years and it seems that although people are avoiding the high street they are still enjoying their weekend outing to the garden centre, with spending here up by 36.2%.
Val Soranno Keating of Barclaycard said: "While a number of economic indicators are pointing in the right direction, with employment up and inflation falling, consumer spending remains in the doldrums, registering a drop in real terms compared to last year.
"There may be more people in employment, but the economic recovery has not yet translated into wage growth, which continues to be sluggish. With predictions that wages won't return to pre-recession levels for another three years, the outlook for consumer spending is set to be uncertain for some time to come."
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