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Growth in consumer spending

Growth in consumer spending

Category: Money

Updated: 13/02/2015
First Published: 13/02/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Figures released earlier this week have revealed a clear rise in consumer spending – particularly on non-essential items – as the improving economy begins to feed through into people's wallets.

How much was spent?

The research, from Barclaycard, shows that consumer spending grew 3.2% in January, as wage growth and falling prices allowed consumers to treat themselves once more. Spending on discretionary (or non-essential) items grew by an even more impressive 3.5%, more than seven times that of essentials (supermarket spending and petrol), which increased by a more modest 0.4%.

Growth in spending = growth in confidence

The rise in 'non-essential' spending suggests consumer confidence is returning, the report noted, no doubt helped by inflation falling to 0.5% in December and economic growth hitting 2.6%, its highest rate since 2007. This could all mean that consumers are feeling more confident about being able to spend their cash, as the state of the economy means they shouldn't have to hoard their money for a rainy day.

This confidence is set to continue, too, with additional research from the credit card provider showing that 43% of consumers plan to spend more in the early part of 2015. This isn't only good for them (they get to treat themselves, after all), but is also good for the economy, which, in turn, could help further drive the recovery. In fact, 31% of consumers surveyed expect their overall level of confidence to increase as they benefit from improving economic conditions, with 30% anticipating an increase in their personal income and 26% predicting a rise in their level of disposable income.

Chris Wood, managing director at Barclaycard, commented: "Consumer perception seems to have finally caught up with reality. Falling inflation and stronger wage growth mean they are now more likely than not to feel confident in their personal financial situation. This is good news for the economy, which is starting to benefit from consumers' increased propensity to spend, and bodes well for retailers who have had a number of tough years in the wake of the economic downturn."

Spend, spend, spend – but don't forget to save!

Of course, all this good fortune shouldn't get in the way of developing a healthy savings habit. If anything, it should be encouraging you to save more – given that you could well have more disposable income in the foreseeable future, why not put some of it in a savings account? It may not be as exciting as splashing out on that must-have gadget or treating yourself to a weekend away, but it'll pay dividends in the long run.

Alternatively, you could use your new-found financial liquidity to pay down your credit card debt or clear that overdraft - best of all, these options will all leave you with more cash to enjoy in the future! So, make the most of being able to spend, and as long as you stay sensible, you can reap the rewards for the long term.

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