Pre-Christmas consumer spending slumped 2.3% year-on-year in December – the largest decline recorded since June 2020 – as lockdown restrictions conspired to dampen spirits at a crucial time for the retail and hospitality sectors.
The slowdown is documented by Barclaycard and comes despite a surge in spending on essential items, which grew 4.5% year-on-year as people stocked up for the holidays, boosted by a 14.7% jump in supermarket spending and a commensurate 88% jump in online grocery spend.
On the other hand spending on fuel sank 20.7% as movement restrictions prevented most from visiting their loved ones.
A breakdown of where consumers are spending
Non-essential spending dropped 4.9% as wary Britons tightened the purse strings in the face of economic uncertainty, the greatest decline since June when the contraction hit 22.3%.
Unsurprisingly in-store spend declined 8.3% as shoppers were either unwilling or unable to venture beyond their homes without good reason, with online retail picking up the slack among last-minute shoppers – jumping by an impressive 52.2% to account for 46.8% of all retail spending in December.
Riding the online wave were specialist retailers including toy shops, jewelers and gift shops, all of whom saw their collective digital growth stand at 61.9%, outpacing the clothing sector on 34% growth.
With entertainment options limited to sales of box sets, downloadable video games and takeaways also boomed with the food and drink market jumping 81% and digital content and subscriptions rising 41.4%.
Local retailers also enjoyed an uptick in trade with constraints on movement and a public determination to support family businesses by 54% contributing to a 43.7% rise in trade among independent butchers, bakers and off-licenses.
Christmas cheer was in short supply among larger brick-and-mortar outlets however, with department stores and clothing outlets enduring falls of 15.2% and 7.3% respectively.
Bars and pubs meanwhile suffered a 71.4% decline while restaurants slid 65.4% in the wake of canceled social events.
Travel predictably bore the brunt of restrictions after shrinking 63.8% but airlines saw a relative improvement in their rate of contraction, declining by 58.1% versus the previous month's decline of 73.6%.
Travel agents also reported a smaller drop of just 72.3% as cabin fever led 22% of Britons to begin making preparations for postponed holidays in 2021.
Why it matters
Confidence in the UK economy remains in short supply with just 22% optimistic about the country's prospects, a staggering 20% drop on the same time last year.
On a micro-scale confidence in individual households has held up surprisingly well, with 68% comfortable in their financial position and 24% feeling more confident in increasing discretionary spend, driven by saving generated elsewhere as a result of lifestyle changes.
All this has knock-on consequences for ad spend, which remains intrinsically tied to broader consumer sentiment – as demonstrated by a dramatic third quarter plunge precipitated by households battening down the hatches.
Raheel Ahmed, head of consumer products at Barclaycard sees light at the end of the tunnel, saying: “Small businesses have continued to remain agile to these changing consumer habits – with many going online for the first time. From dog walking services to subscriptions of weekly meal kits, small businesses are exploring new ways to reach their customer base.
“With the latest government guidance to stay at home and a vaccine roll-out on the horizon, we are all hopeful of a brighter and more prosperous year ahead.”