Consumer spending up in December despite concern around covering essential costs

Non-essential spending grew in December despite consumers being concerned about their finances and ability to cover essential costs, according to Nationwide’s latest monthly Spending Report.

Nationwide’s latest report¹ analysed more than 238 million debit card, credit card and Direct Debit transactions made by the Society’s members between 1 and 31 December 2022. Over the course of the month, overall spending rose eight per cent compared to December last year (+3% vs November 2022), though annual growth remains below the current level of inflation of 10.5%. The number of transactions made by members also saw annual growth of eight per cent, with a four per cent rise on the volume of transactions in November.

Despite cost-of-living pressures, there were more non-essential transactions made this December than there were in the same month last year (+8% vs Dec 2021), with spend growing by nine per cent within the same period. Even with people taking advantage of Black Friday deals and doing their Christmas shopping earlier, there was a seven per cent increase in the number of non-essential transactions made in December compared to the previous month, predominantly because of the Christmas period.

Essential spending continues to see annual growth – in December, spending grew by eight per cent. However, Nationwide’s spending data suggests that members have more essential costs to cover at the end of 2022, with the number of essential transactions up nine per cent on December 2021.

Despite growth in spending and volume of transactions on non-essential items, a separate poll² of more than 2,000 people across the country found 69 per cent are worried³ about the state of their personal finances and ability to cover essential costs, such as food and drink, utility bills, mortgage and rent payments and credit card repayments. More than one in five (23%) say they are extremely worried.

Perhaps surprisingly, levels of concern are broadly similar across different household income groups. Nearly three quarters (73%) of those with an income up to £25,000 are worried but, in a nod to a squeezed middle, that figure is similar (72%) for those with a household income of between £35,001-£55,000. Regionally⁴, Londoners are most concerned about the current state of their finances (74% are worried) with those in Wales at the opposite end of the spectrum (only 61% are worried).

Essential spending overview (full data by category in table below): Spending in supermarkets grew by 11 per cent in December compared to the same month last year, with the volume of transactions growing by the same amount. Despite the challenges facing household finances, there appeared to be a determination to enjoy what was perhaps the first normal Christmas since the onset of the pandemic. Linked to that, spending on travel, which includes public transport, grew by more than a quarter (26%) compared to last year as people looked to travel to see family and friends for Christmas. Perhaps reflective of an increased use of unsecured lending to help cover both essential and non-essential items, there was a 12 per cent annual growth in the amount spent on credit card repayments. Spending on utilities, such as gas, electricity and water, was also up by a third (+33%) on last December, reflecting the higher costs that consumers are experiencing compared to 12 months previous.

Non-essential spending overview (full data by category in table below): The growth in non-essential spending in December was largely driven by airline travel (+107% vs Dec ’21) and holidays (+57%) at Christmas time. The hospitality sector also saw benefits in December with spending on eating and drinking out growing (+20% vs Dec ’21). Spending on clothing and shoes also grew (+13% vs Dec ’21) as people looked to refresh their wardrobes for Christmas parties and also purchase items for presents.

According to separate Nationwide research², nearly a third (30%) of people only have up to £200 for discretionary spending after essential costs have been covered each month. This rises to 43 per cent of those with a household income of up to £25,000. Even 22 per cent of those earning between £45,001-£55,000 only have up to £200 left for non-essential spending.

Nearly one in ten (9%) say they have no discretionary money to spend and this is, perhaps unsurprisingly, most prevalent among lower income households (17% for those with a household income of up to £25,000). However, eight per cent of those with an income of between £25,001-£35,000 also have nothing left for non-essential purchases, according to the research.

Credit card debt:

While Nationwide’s spending data¹ shows the amount spent on credit cards was up seven per cent on December last year, the Society’s poll² suggests that consumers are starting 2023 with more debt on their credit card. More than a fifth (22%) admit they have more outstanding debt on their credit card this January than they did last January. That rises to 31 per cent for those aged 25-44. Based on household incomes, it’s those with between £65,001 and £75,000 who are most likely to have more credit card debt this January (+30%). The survey also showed that one in ten (10%) didn’t have a credit card last January but do this year.

The key reasons behind having more outstanding balance on credit cards this January include:

• Using the credit card more to help manage finances and spread costs out (37%)
• Using the credit card more this year for everyday essential expenses, such as food, drink and fuel (34%)
• Purchased more items at Christmas (22%)

Non-essential spending cutbacks:

Nationwide’s data¹ once again shows a drop in spending on non-essential items like dating, DIY and subscriptions, but according to the Society’s poll², spending on eating and drinking out as well as clothing and shoes are the areas where people are primarily planning to cut back this year:

• Eating and drinking out (45%)
• Clothing and shoes (35%)
• General non-essential shopping, such as in department stores (32%)
• Holidays and travel (26%)

Nationwide support:
Nationwide Building Society is supporting members struggling with the rising cost of living. A freephone cost-of-living hotline (0800 030 40 66) is available for those experiencing money worries. The service is supported by dedicated, trained experts based across the Society’s main branches. It is available from 9am-4.30pm weekdays and 9am-12pm Saturdays. Nationwide is aiming to answer calls to the hotline within ten minutes. Anyone in financial hardship should contact their bank or building society for support. See more at Cost of living | Nationwide.

Mark Nalder, Payments Strategy Director at Nationwide Building Society, said: “Despite people looking to enjoy Christmas this year, our research also suggests that cost-of-living concerns haven’t been put completely aside. A significant proportion of people are worried about the current state of their finances and how they will cover even just the essential costs. This will likely continue into the New Year.

“One way households are dealing with costs is through the use of credit cards, with our research revealing people have more outstanding debt on their cards this January than they did 12 months prior. Although our research shows there will be people paying off their credit card debt in full this month, there are plenty who will only pay the minimum amount required or even less. This is something we will continue to monitor as the year progresses. We would always encourage anyone who is struggling financially to contact their bank or building society for support.”

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