Spending drops in September as consumers cut back on costs ahead of energy price rise

Consumer spending fell again in September as annual growth dropped due to households cutting back on non-essential costs ahead of energy price rises, according to Nationwide’s Spending Report¹.

Overall spending in September totalled just over £8 billion, which was down three per cent on August, and just six per cent up on September last year. The total number of transactions (c217m) were also down four per cent on August and only slightly more than were made in September last year (+5%).

Year-on-year rises on essential bills and services like energy, fuel, mortgages, rent and debt repayment have put pressure on households to cut back on costs, particularly in light of October’s energy price cap increase. This increase is mirrored by reducing spend across many discretionary areas such as dating, gambling, gardening, DIY and subscription services – all of which are down compared to 12 months previous.

Essential spending snapshot: While essential spending was up nine per cent on September last year at just over £3.69 billion, there was a three per cent fall in the amount members spent month-on-month. The total amount spent on fuel and electric car charging was 12 per cent higher year-on-year, reflecting higher prices at the pump. However, compared to August, spending fell seven per cent through a combination of the fall in the average price of petrol in September and reduced vehicle usage as the summer holidays season ended. Payments on mortgages and rents remain up on last year, increasing by 12 per cent and eight per cent respectively. Spending to pay off other debts, such as credit cards and loans, also outstripped last year (+14%). And while a 123 per cent increase for childcare in September reflects the end of the summer holiday period, a 31 per cent annual growth suggests that childcare costs are much higher than they have been for a number of years and/or people are having to work increased hours to fund costs at home².

Non-essential spending snapshot: Total spending on non-essential purchases was around £2.76 million. This marked a seven per cent decrease compared to August although was six per cent higher than in September 2021. The number of transactions matched the monthly and annual spend fluctuations, at seven and six per cent respectively. Following August’s comparative spending boom, there was a notable drop in spending on eating/drinking out (down 13 per cent vs August, but an eight per cent increase on last September), and leisure and recreation in September (down 15% vs August and with no change (0%) on September 2021) as the energy price rises approached.

The cutbacks made by members on items, such as subscription services (-4%), dating (-7%) and DIY (-6%) also continued in September with spend down on last year. Spending on gambling, such as lottery tickets and scratch cards, was down five per cent on August, and perhaps more significantly, down four per cent on September last year.

One area where there was an increase in spending both compared to last month (+6%) and last year (+18%) was digital goods, with console games accounting for a large proportion of this growth given the launch of popular games, such as FIFA ’23. Spending on charities also saw up uptick in September with a five per cent increase in the amount spent compared to August.

Mark Nalder, Payments Strategy Director at Nationwide Building Society, said: “While August saw people spend on the things they love and enjoy, there were signs that consumers were beginning to tighten the household finances and autumn drew closer. That now appears to have happened, with our latest research showing clear signs of cutting back on discretionary costs. The annual growth in spending on utilities and other household bills is likely to be of concern as it is indicative of further pressure on consumers and we expect the amount spent to increase further in the months ahead. The likelihood is that the downturn in spending is likely to continue as people tighten their belts now to prepare themselves for the Christmas period, either so they have sufficient to spend, something to save or in some cases enough to get by.”

Essential spend overview

• Childcare: Spending continues to higher levels with annual growth in September at 31 per cent, reflecting rising costs. The 123 per cent month-on-month growth reflects the end of the summer holidays and parents returning to work. The average transaction value on childcare in September was £32.10 – up five per cent on last year.
• Utilities and bills: Annual growth in spending on utilities and bills continues to remain high (+23% vs September 2021) given increasing costs across utilities and other household bills. The average transaction value in September was £91.28 – an 18 per cent increase on last year.
• Fuel/Electric Car Charging: Spending fell seven per cent month-on-month reflecting the drop in the average fuel price over the last month. However, the 12 per cent annual growth really shows fuel prices remain higher than compared to the same point last year. The five per cent drop in the number of transactions suggests people are reducing their vehicle usage. The average transaction value was £30.09 – up 12 per cent on last year.
• Supermarket: The number of transactions (-4%) and total spend (-5%) were down in September compared to August as consumers are indicative of consumers reducing purchases and looking for bargains and cheaper items when shopping. The average transaction value in supermarkets in September was £17.60 – a one per cent drop on August and a two per cent fall on September 2021.

Non-essential spend overview

• Digital goods: Spend was one of the only non-essential categories to see both monthly (+6%) and annual growth (+18%) with that increase being driven by the purchase on console games, especially given September saw the launch of hits such as FIFA ’23.
• Eating & Drinking: After August saw a boom in spending on eating and drinking out, September saw a 13 per cent drop in spending as the start of Autumn, with worsening weather dampening many social calendars. The average transaction value of £13.59 is down five per cent on August.
• Subscriptions: For the fourth consecutive month, the annual growth in spending on subscription services, such as Netflix, Amazon Prime, magazines and wine, fell by four per cent. It was down three per cent on August. The number of transactions fell by six per cent, both against the previous month and 12 months. The average transaction value of £13.07 was up three per cent, reflecting that while people are cutting back on the purchases they make, the subscription services they are keeping have generally increased in price.
• Gambling: As efforts increase to cut out purchases that people believe are unnecessary, gambling spend (e.g. Lottery tickets and scratch cards) fell compared to August (-5%) and also September last year (-4%).
• Charities: September saw an uptick on spending with charities – up five per cent on August – as people also think about others less fortunate than themselves at what remains a difficult time for many.

Ways to pay:

There was a drop in spending via credit cards in September, with nearly 15 million transactions made using Nationwide credit cards – down seven per cent on August and only slightly higher (+1%) on last year. This is understood to be driven by members using their debit cards to help with money management in order to free up credit for emergencies. As such, transactions made with debit cards were six per cent higher than in 2021. However, reflecting increasing household bills, Direct Debit spend rose by 12 per cent compared to September last year.

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