Consumer spending tends to be a reliable indicator of the health of people's wallets, and happily, new figures from Barclaycard show that consumer spending rebounded in May, posting a welcome rise of 3.6% from the previous month. However, all may not be as it seems, because although spending is on the up, the level of consumer debt has seen a worrying uplift, too.
Barclaycard's figures suggest that it's the arrival of more spring-like weather, together with the bank holidays, that fuelled the rise in spending, with May's figures marking a welcome turnaround from the weak growth rates recorded in March (+1.6%) and April (+1.9%).
The warmer weather in particular fuelled strong spending growth in garden centres (+9.4%) and DIY stores (+4.8%), both of which rebounded after the colder weather earlier in the year, but many took full advantage of the long weekends by spending more on clothing (+6%) and entertainment, with spending in pubs (+15.2%), restaurants (+12.3%) and cinemas (+13.3%) all seeing healthy growth.
This all helped high street spending record positive growth for the first time since October, rising by 0.7% on a monthly basis, while online spending saw double-digit growth of 12.5%.
"Warmer weather is generally a good pre-cursor for a positive uplift in consumer spending and May proved to be no exception," said Paul Lockstone, managing director at Barclaycard. "The eventual arrival of spring brought about a reversal of the fall we saw in spending on the home and clothing in March and April, and acted as a welcome boost to retailers in those sectors."
In even better news for consumers, spending on household essentials hasn't recorded particularly strong growth, with this measure rising by just 0.5% month-on-month – only the second time it's been in positive territory in the last 18 months. This has been driven by the slight recovery in supermarket spending (up 0.2%), while spending on petrol continues to decline (-3.4%).
As a result of all this positivity, consumers' confidence in their household finances has recorded a similarly positive boost, rising by three points in May to stand at 60%. Despite being down from the average of 71% in 2015, this is still an improvement from April's figure of 57%, although confidence in the wider economy deteriorated further (down five points to 30%).
However, despite these seemingly positive figures, it appears that some consumers may be using their newfound confidence to increase their level of debt, too.
Indeed, latest statistics from The Money Charity reveal that individuals are taking on unsecured debt at a faster pace than any time in the last decade: on average, consumers have £3,629 in credit cards, personal loans and other forms of consumer credit, up from £3,171 at the end of 2013.
The charity points out that, although this is still below the high point of consumer credit in 2008, the "sustained growth may place many consumers in precarious financial positions", with each adult potentially owing an average of £271 more by the end of the year if the pace of growth continues.Michelle Highman, CEO of The Money Charity, commented: "Credit can play a really useful role in people's lives – spreading the cost of purchases and smoothing unsteady incomes. Debt is not always a negative sign, either; as a country, we tend to borrow more when we're doing better. But debt can also creep up as a problem, both for society and for individuals."
The overall message is clear – if you want to spend, do it wisely! Spending from your disposable income will always be preferred, but if you want to turn to credit, make sure it works harder for you. Putting a big purchase on a 0% purchase credit card, for example, can be a great way to spread the cost, or if you're looking forward to all those summer days out, you may want to consider a cashback credit card.
Doing so can be a great way to get something back from your everyday spending, and if you make sure to pay off the balance in full each month, you needn't worry about interest negating the benefits of the cashback. However, if you're already past the point of no return and are beginning to struggle with your repayments, take Michelle's advice and contact a debt advice charity to help consider your options, and hopefully you'll be able to strike the right balance between sensible spending and manageable debt.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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