Business

UK consumer spending continues to rise despite rising inflation

UK consumer spending is showing resilience thanks to early Christmas shopping and enthusiasm for dining out and entertainment despite rising inflation, adding to pressure on the Central Bank. You have to raise interest rates.

Several factors threaten the recovery in household spending including rising inflation a decade high, tax increases, gas prices soar and the withdrawal of Covid to support jobs and incomes.

“But for now consumers are resilient,” said Andrew Goodwin, chief UK economist at Oxford Economics.

Both official and non-standard economic data showed that despite the difficulties, consumer spending on goods and services rose in October and November. Early Christmas shopping helped sales. retail return to growth Last month, while spending at cinemas, bars and restaurants rebounded to pre-pandemic levels.

“It’s clear that people are in a festive mood,” said Elizabeth Martins, senior economist at HSBC.

Good job numbers, record high vacancies, falling Covid-19 infection rates and the late September fuel crisis have led to more upbeat consumer confidence, which rose 3 destinations minus 14 in November, according to an index compiled by research firm GfK.

Governor of the Bank of England Andrew Bailey warning in an interview with The Sunday Times that economic activity is “slowing” and the risks to its inflation forecast are “two-sided”. The BoE now expects inflation to peak at 5% in April.

Still, Goodwin said higher-than-expected spending in the health and consumer sectors would “provide some encouragement for those Monetary Policy Committee members who are worried about slowing growth.” before the meeting next month.

Adam Hoyes, economist at Capital Economics, said the incoming positive data “adds more evidence that activity held up well in October and should raise expectations that the Bank of England will raise interest rates.” from 0.10% to 0.25% in December”.

According to data from Box Office Mojo, the company that tracks box office deals, UK cinema sales rose above pre-pandemic levels throughout October and November.

Column chart of Weekends in October to second week in November, $m shows Spending at UK cinemas above pre-pandemic levels

Similarly, the number of diners at the restaurant as of Saturday, November 20 was 30%. above on the same day of week 2019, according to ticketing platform Open Table.

“Restaurant sales continue to be very strong,” says Martins.

Transactions at the sandwich chain Pret at Manger also increases during the fall when the number back office workers grow up.

January 2020 moving average = 100 showing an increase in Transaction volume at Pret A Manger stores

According to data from Fable Data, a data company, and the Bank of England, both the value of banking transactions and credit and debit cards tend to increase in the autumn.

Over the past few weeks, consumer spending growth has been “above the recent average”, hitting a year-to-date high in the week to Nov. – 12% higher than 2019 levels.

Spending at pubs and restaurants is showing a similar trend, he added, and is “always around 10% higher now than it was in 2019”.

Line graph of % change from the comparable week in 2019 shows UK consumer spending has increased

Retail sales rose 4% in the week ending Nov. 20 from the previous weeks to about 88% year-on-year, according to data from retail consultant Springboard.

“The start of the Christmas trading period kicked off in earnest in many retail destinations last week,” said Diane Wehrle, director of details at Springboard. Springboard, note that upscale streets, shopping malls and major cities benefit the most.

“It’s clear that shoppers are flocking to larger towns and cities to soak up the Christmas spirit,” she added.

She expects purchase rates to increase by 8% during the week of Black Friday, the US-inspired sales holiday, which falls on Nov.

The opportunity to spend stronger during the festive season is supported by the rapid rollout of the third coronavirus, with more than one in four people aged 12 and over in the UK having been vaccinated, drastically reducing the risk of infection. muscle is limited. introduce again.

Jacqui Baker, partner and head of retail at tax consulting firm RSM UK, said: After last Christmas, “we could see consumers pouring out into a bouncy festive season income, especially when many households will save”.

The prediction comes as mobility continues to normalize, with London rail, bus and pipeline usage reaching its highest levels since the start of the pandemic. Meanwhile, the number of flights is increasing rapidly as seasonal leisure travel returns. “People are definitely traveling more,” said Gabriella Dickens, an economist at macroeconomic consulting firm Pantheon.

7 day moving average line graph, % change from same week in 2019 showing an increasing number of flights in the UK

Non-standard economic metrics, such as footfalls, restaurant reservations and mobility measures, are less comprehensive than official figures of economic activity, but they are increasingly sought by decision-makers monitoring policies as more timely indicators of the health of the economy.

Consumer spending has been the driving force behind the UK economy’s recovery since the peak of the pandemic, bringing many sectors to a standstill. In the third quarter, it contributed 1.2 percentage points of economic growth of 1.3 percent.

Some economists expect growth to slow in the final months of the year as the effects of the easing of Covid restrictions fade, supply chain disruptions and shortages hit manufacturing capacity and inflation. increase leads to a decrease in real income.

Yael Selfin, chief economist at consulting firm KPMG UK, warned: “The rise in National Insurance contributions, coupled with higher inflation eroded the purchasing power of households, as did households. Rising interest rates could cause households to spend less.”

“For now at least,” said Sandra Horsfield, economist at Investec, the data provides “a positive sign”.

“Not only have household incomes benefited from strong employment growth, but they have also had a substantial amount of excess savings during the pandemic,” she noted.

Source link

news7h

News7h: Update the world's latest breaking news online of the day, breaking news, politics, society today, international mainstream news .Updated news 24/7: Entertainment, Sports...at the World everyday world. Hot news, images, video clips that are updated quickly and reliably

Related Articles

Back to top button