Want versus need: Essential spend grows 10% in a year as discretionary costs stall

Consumer spending grew six per cent year-on-year in October – matching September’s growth and further demonstrating the impact the rising cost of living is having on households.

Nationwide Building Society’s latest monthly Spending Report, which analyses around 230 million debit card, credit card and Direct Debit transactions, reveals spending made by its members in October¹. The period saw essential spending grow 10 per cent, reflecting the increased costs of bills and services like energy, fuel, food and drink, mortgages, rent and debt repayment.

Increasing essential costs on things households need to pay for is reducing the amount of money available for households to spend on the discretionary things they want to purchase. As a result, annual growth in non-essential spending was lower at six per cent (the same as in September) as people attempt to strike a balance.

The Society’s data reveals members are continuing to shun non-essential purchases, such as subscriptions and home improvements, with the biggest annual drop recorded in October being dating services – with spending down 12 per cent on October last year.

Essential spending overview:

October saw a 10 per cent annual growth in essential spending – reaching around £3.76 billion – reflecting the increased costs of bills and other essentials, such as fuel and food and drink. Spending on utilities and bills was up 17 per cent on October 2021, despite government support. However, it fell four per cent month-on-month, likely also due to the start of discounted energy costs.

• Supermarket spending was up six per cent year-on-year and up seven per cent on September, likely as a result of the increased costs of food and drink items, which are playing a major role in rising inflation. After two consecutive monthly falls in the number of transactions, October saw an uptick (+5% vs September) as people spend more time at home.
• Fuel transactions were up 10 per cent annually, while the spending increase of 23 per cent compared to October last year reflects the current high prices at the pump. The average transaction value of nearly £30 is 11 per cent higher than 12 months previous.
• The amount spent paying off existing debt, such as credit cards and personal loans, was up 15 per cent on last year, suggesting that the rising cost of living has forced increasing numbers to turn to credit to make purchases, therefore increasing the amount that is needed to be paid back.
• There continues to be an increase in the amount spent to pay for living in a home as spending on rent payments saw a 15 per cent annual increase in October, with the amount people spent to pay their mortgage up 13 per cent year-on-year.

Non-essential spending overview:

Total spending on non-essential items was around £2.94 billion in October – a six per cent increase on October last year and markedly lower than the current level of inflation as the increases in essential spending force people to try and cut back elsewhere.

• While spending on subscriptions, such as Netflix, Amazon Prime, wine and magazines, increased by six per cent month-on-month, it remained lower than was seen last year – down four per cent on October 2021 – as people look to either cancel their subscriptions or look for cheaper plans.
• Spending on airline travel saw an uptick in October (+4% vs September) perhaps impacted by the half term school break and families wanting to take a short break.
• Digital goods, such as console games and e-books, continues its recent upward trend with spending in October up 19 per cent year-on-year and up 14 per cent on last month.
• Spending on eating and drinking out has increased 10 per cent compared to October last year, while the number of transactions was up 11 per cent year-on-year.
• There was a 20 per cent uplift in spending on gardening. However, this is likely as a result of people purchasing decorations and other Christmas items from garden centres and preparing their gardens for the winter months.
• Spending on DIY and home improvements saw a small uptick in October (+11% vs September) as people use the winter months and their extra time at home to make their properties look good ahead of the festive period. However, it is still down five per cent on October last year.
• Spending on clothing and shoes saw a 12 per cent monthly increase in October (and +4% year-on-year) as winter sets in and the festive season approaches with people wanting to purchase new and warm winter clothes.

Mark Nalder, Payments Strategy Director at Nationwide Building Society, said: “As expected, rising essential costs are putting increasing pressure on households, forcing them to divert even more income towards them. Annual growth in non-essential spending is at its lowest level seen so far this year as people reign in spending on the things they want so they can afford the things they need.

“With the festive season fast approaching, we expect consumers to look for discounts during Black Friday and Cyber Monday as a way of saving money in the run-up to Christmas before the nation starts to budget in the New Year.”

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