A strong year overall for consumer spending, with the “experience” sector the clear winner
There’s no question that the past year has been an eventful one for the UK, with Brexit in particular casting a shadow on the economic outlook and consumer confidence. Despite that, consumer spending overall has showed greater resilience than many expected.
Two other trends in consumer spending that also stand out in the past year are the rise of the experience sector, and the widening gap between the high-street and e-commerce.
Consumer spending held up
According to data from our UK Consumer Spending Index, average spending growth across the whole year was a healthy 2.0% per month, as consumers appeared to have shrugged off Brexit worries and continued to spend. However, a closer look showed the shape of growth across quarters had peaks and troughs.
The year began with a strong start in Q1, with growth up on average 2.4% each month. This was followed by a slowdown in Q2 and Q3, as uncertainty in the run up to and following the Brexit vote did temper spending habits. The year finished off with a bounce back in Q4, as average spend accelerated to an average of 2.8%, making Q4 the strongest quarter in two years. This upsurge was in large part due to another successful Black Friday event, combined with solid levels of growth in the run up to Christmas.
The "experience economy" powered ahead
The biggest driver of overall growth across, and most particularly in 2016 was the “experience economy”. It’s clear from the data that consumers are spending more on eating out, booking holidays and discovering new experiences, than on buying goods. Annual growth for the hospitality sector averaged at 6.9% each month; leisure followed closely at 6.5%. Spending on clothing and footwear however trailed behind at more moderate growth rates of 1.1%.
One of the drivers here may be the increasing role of social media in consumers’ lives - where interesting experiences can help generate engagement envious peers. Many retailers have been quick to exploit this trend and are now creating digital and virtual environments in department stores and shopping destinations, encouraging shoppers to engage.
Online was the clear winner
2016 was another great year for online retailers, with growth averaging at a healthy 5.4%. In contrast, the high street remained almost flat at 0.2%. The last minute dash for Christmas presents did cause a slight uplift in face to face growth in December, but overall, spending growth was clearly moving online. As consumers become more comfortable with using mobiles and tablets to shop on the go, the gap between online and the high street will continue to widen.
Overall, 2016 was a strong year for consumer spending, despite events that could have thrown them off track. As 2017 continues and consumers resume their regular routines, retailers will be keen to see whether the strong momentum seen in the last part of the last year carry into the New Year.