Will UK Consumers Cut Back Spending This Christmas ?
Table of Contents
- 1 Will UK Consumers Cut Back Spending This Christmas ?
- 2 UK Retail Sales Dip In November
- 3 UK Economic Growth Slows In Q4
- 4 Brexit Uncertainty Continues To Impact Consumer Spending
- 5 Scotiabank: UK Consumer Spending Will Slow This Holiday Season
- 6 Conclusion
- 7 Read More:
Will UK Consumers Cut Back Spending This Christmas ?
It’s almost the holiday season, which means it’s time to start shopping for gifts. But will Christmas spending be reduced by British consumers? The apparent resolution seems to be a little bit vague. There is concern that a recession in the UK is a real possibility in the wake of the Brexit decision. Given the potential stagnation of incomes, this may cause individuals to rethink their gift-giving strategies. However, there are forecasts suggesting consumers may still spend more than normal throughout the Christmas season. Rising interest in jewels and automobiles is a contributing factor. Even though it’s hard to tell whether Brits will rein down their holiday spending this year, preparation is key. Check out our best advice for avoiding Christmas debt if you want to be sure your gift-giving doesn’t put you in the red.
UK Retail Sales Dip In November
Markit reported that retail sales in the United Kingdom fell in November compared to November of previous year. Sales of both apparel and home furnishings contributed to the decline in consumer expenditure, but sales of food and drink were relatively unaffected. This follows months of weaker growth in UK retail, which has fueled fears that shoppers may rein in their spending this Christmas. But merchants are confident that annual consumer spending will still be high, despite the recent slowdown. Whether or whether consumers really act in accordance with these forecasts has to be seen, but data so far suggests they are wary of making major purchases.
UK Economic Growth Slows In Q4
Consumers’ reluctance to spend money dampened the UK economy in the fourth quarter of 2016. Office for National Statistics (ONS) estimates indicate that GDP increased by 0.2% in Q4, down from 0.3% in Q3 and below the 0.4% level predicted by experts. Overall economic activity was less than projected, with government consumption (-0.3%) and household consumption (+0.1%) both doing poorly. Wage growth and inflation are expected to decelerate in the coming months, which might further limit consumer spending this year. At the same time, corporate investment (-1%) remained on a downward trend, dampening expectations for GDP expansion in the future.
The latest GDP data demonstrate that despite a number of challenges in recent months, the UK economy remains robust. Nonetheless, if consumer spending declines more in the coming months, it might derail longer-term economic growth forecasts and prompt the Bank of England to tighten monetary policy even further (BoE).
Brexit Uncertainty Continues To Impact Consumer Spending
Many Brits still feel less confident about making large purchases because of Brexit. Nearly one in five Britons (19%) think they are “less likely” to spend this Christmas than normal, with another 18% saying they are “about the same” as in years past, according to research by credit card giant Barclaycard. Among those who voted to leave the European Union in the 2016 referendum, that number jumps to 31%. But although 21% of people say they want to spend more than normal on Christmas, just 5% say they plan to spend less than usual. Despite these figures, Barclaycard is nevertheless bullish about consumer spending over the Christmas season – with 71% of Brits stating they aim to either buy or dine out more this year than last. Inflation is expected to hit 3% this year, which means that some individuals may have trouble affording holiday essentials like food and presents.
After the UK’s decision to exit the European Union in 2016, it’s apparent that customers are still nervous about making long-term purchases. This has had a substantial influence on their spending habits – with over one third of respondents claiming that they are less likely to spend this Christmas compared to usual, and another 18% saying they are about the same as before. In addition, 31% of Leave voters report being more optimistic than normal about spending over the holiday season; yet, even among these voters, there is anxiety about affordability, with 71% reporting that they would cut down on Christmas spending.
Scotiabank: UK Consumer Spending Will Slow This Holiday Season
Scotiabank predicts a decrease in Christmas spending by British consumers. According to their findings, Christmas spending is expected to decrease by 0.5% this year. This represents an increase of 1% in consumer expenditure from the previous year. Lessening spending incentives like Black Friday and Cyber Monday sales are the primary cause of this trend. As a result, consumers are feeling the pinch as the weak pound raises the cost of imports.
While the drop in consumer spending is disheartening, it is not unexpected given the state of the economy. We can only hope that next year will be better and that Christmas spending will rise by even more.
Many people in the United Kingdom have been discussing the possibility of spending less on Christmas presents. As Brexit and the economy loom larger, there is a widespread worry that Britons may become less charitable than they usually are. It’s too early to tell whether Christmas spending will be down for consumers this year, but if past years are any indicator, it’s probable that there will be some reductions in total expenditure. Just have to wait and see what develops!
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