Rise in discretionary spending continues as people feel more optimistic about finances as the summer approaches

May’s extra Bank Holiday gave non-essential spending a boost as households increasingly spend more money on themselves in 2023, reveals Nationwide’s latest monthly Spending Report¹.

There has been positive annual growth in non-essential spending every month so far this year and that continued in May, with a four per cent year-on-year rise recorded.

The sunnier weather is helping ease the concerns of consumers as separate consumer research² from Nationwide highlights that the number of people worried³ about their personal finances and ability to cover essential costs has fallen to 67 per cent – down from the peak of 74 per cent last month. More than one in six (16%) now say their finances have improved since the start of the year, and of these, 49% say this is due to pay rises and seeing the benefits of cutbacks they have already made such as reduced spending on entertainment i.e. watching films at home rather than going to cinema etc (26%).

Nationwide’s Spending Report – a monthly analysis of nearly 241 million debit card, credit card and Direct Debit transactions – shows that c£8.84 billion was spent overall in May, including essential and non-essential categories. This marked a five per cent increase compared to the previous year as a result of rising prices and increased transactions – up seven per cent on last year. (see breakdown of categories below and in the tables in Notes to Editor).

Non-essential spending overview (full data by category in table below): at £3.26 billion, overall non-essential spending was up four per cent on last May and four percent on the previous month. The number of transaction (c109.6m) were up by six per cent. Highlights include:

• Airline travel: There was a 25 per cent annual growth in spending on airline travel as members continued to fly for holidays and work, with the number of transactions made to airlines up 41 per cent.
• Digital goods: May saw a 28 per cent annual rise in spending, with consumers making 22 per cent more transactions as consumers focused on entertainment at home rather than going out.
• Gardening and Garden Centres: Spending bloomed by 12 per cent in May as consumers continued their spring planting, while the number of transactions rose 13 per cent.

Essential spending overview (full data by category in table below): the amount spent during May reached around £4.42 billion – a five per cent increase on May 2022. The volume of essential transactions at c122.4m was up seven per cent on 12 months’ previous.

• Mortgages and Rents: the Bank Rate has continued to rise and with wider economic uncertainty spending on mortgages in May was up 15 per cent year on year, while spend on rent increased 18 per cent.
• Utilities: Spending on utilities, such as electricity, gas and water continues to rise with spend 16 per cent higher than the last year and the average transaction increasing to £90 a month.
• Supermarkets: With food and drink inflation remaining stubbornly high, there was a 13 per cent annual growth in spending in supermarkets in May. However, there was also a nine per cent rise in supermarket transactions compared to May 2022, which could be due to members taking advantage of the sunnier weather and extra Bank Holidays for barbecues in the garden.

 Consumer plans for summer:

According to Nationwide’s poll of more than 2,000 people², while cost-of-living pressures remain for households, many still see some luxuries as an essential part of summer. The top things people will still spend money on include a holiday (29%), day trips to places like the zoo, beach etc (26%), eating out (21%) and visits to the pub (17%).

The average person will spend £1,491 on a holiday, on everything from flights to accommodation, spending money, eating and drinking and excursions. However, more than four in ten (42%) are cutting the cost of this year’s holiday by either staying in the UK rather than going abroad (38%), changing the type of holiday (i.e. half-board rather than all-inclusive - 28%), opting for short haul over long haul (26%) or reducing the number of excursions when away (22%).

Mark Nalder, Payments Strategy & Performance Director at Nationwide Building Society, said: “Inflation continues to push up essential consumer spending, but with sunnier weather and three Bank Holidays in May, spending on non-essential items still saw a four per cent year on year rise.  

“Despite cost-of-living pressures, many consumers are throwing caution to the wind and still want to enjoy a summer holiday with their family. However, there are signs that people are being more cautious over their holiday spending as households opt for UK staycations or short haul trip rather than long haul in an effort to keep costs down.

“The school summer holidays can be a very expensive time for families as spend on childcare, food and drink and ways to entertain the children continue to mount up, so it is likely we will continue to see non-essential spending rise in the weeks and months ahead.”

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