Card spending returns to growth in May, as consumer confidence begins to show signs of recovery

Consumer card spending grew 0.8 per cent year-on-year in May, up from April’s -0.1 per cent decline, but still below the latest CPIH inflation rate of 3.4 per cent. Essential spending climbed 0.7 per cent, led by an 11.9 per cent increase in fuel spending, while non-essential spending returned to growth, at 0.9 per cent, after falling -0.3 per cent last month.

Consumer confidence in the UK, European and global economies all rebounded in May, returning to the levels seen at the beginning of the year, after declining in March and April.

Consumers’ confidence in their household finances and ability to live within their means improved one percentage point each, to 65 per cent and 70 per cent respectively, while consumers’ confidence in their ability to spend on non-essential items grew to 52 per cent (up from 49 per cent).

Concerns about the impact of the Middle East on costs remain high, but have eased month-on-month, with a lower proportion of consumers concerned about rising energy bills (83 per cent, down from 85 per cent) and food prices (82 per cent, down from 84 per cent).

Consumers cut costs and build savings buffers to manage uncertainty

Two in three (65 per cent) are making financial adjustments in response to current uncertainty, with this group limiting non-essential purchases (45 per cent), takeaways and meals out (42 per cent) and energy use at home (38 per cent).

Of those making the effort to cut discretionary spending, 35 per cent say their top reason for doing so is to offset an increase in essential costs, while 34 per cent cited building a savings buffer as their main motivation.

Entertainment returns to growth

Entertainment spending grew 5.8 per cent in May, after declining -0.6 per cent in April, supported by the box office success of the long-awaited sequel The Devil Wears Prada 2, as well as The Sheep Detectives and Michael.

Digital content and subscriptions continued to perform strongly, rising 12.8 per cent year-on-year, its highest growth since August 2021. This was supported by popular series including RivalsSeason 2, Euphoria Season 3 and Off Campus, as well as the final matches of the Premier League and UEFA Champions League, with some matches streamed online.

Airline uncertainty slows international travel

Travel spending fell -5.8 per cent, marking its third consecutive month of decline, with holidaymakers still taking a wait-and-see approach to their summer plans amid ongoing uncertainty. Airline spending led was down -12.9 per cent, suggesting consumers are putting off international travel. A fifth say they are taking a staycation this year, driven by convenience (46 per cent), a preference for UK trips (35 per cent), cost (33 per cent) and a desire to avoid air travel (30 per cent).

May’s sunny weather and the early bank holiday supported several seasonal categories, with food and drink specialist stores up 4.0 per cent, and health and beauty rising 5.0 per cent. Both furniture stores (6.4 per cent), and hotels and accommodation (2.7 per cent) returned to growth, after declining in April (down -0.9 per cent and -2.4 per cent respectively).

Julien Lafargue, Chief Market Strategist, Barclays Private Bank and Wealth Management, said: “May’s data offers an early sign that household demand may be stabilising, but the macro backdrop remains finely balanced. The key question now is whether improving confidence can be sustained, particularly if inflation remains sticky and interest rates trend higher.”

Karen Johnson, Head of Retail at Barclays, said: “The warmer weather and first May Bank Holiday gave consumers more reasons to spend in May, particularly on seasonal essentials, UK breaks and affordable ways to enjoy time with family and friends. Shoppers are still being careful, with many continuing to build savings and managing subscriptions more closely, but they are also finding room in their budgets for the things that feel good value, convenient or worth prioritising.”