Consumer spending soars in January despite cost of living crisis as pandemic measures ease up

Despite the rising cost of living, people are starting 2022 with a more positive outlook than last year with January spend up 18 per cent year-on-year, while transactions were up by more than a third (34%).

The latest Nationwide Spending Report¹ shows both essential and non-essential spend were significantly up year-on-year as the UK started to emerge from lockdown, despite the impact of Plan B measures. In particular, travel was up 241 per cent year-on-year, while holiday spend rose by 379 per cent as the nation started to get back to normal in many ways.

Nationwide’s report, which is now produced monthly, is an analysis of nearly 200 million debit and credit card and direct debit transactions from 1 to 31 January. The latest data shows just over £7.5 billion was spent by the Society’s members during the month, against more than 195 million transactions.

While non-essential spending dropped 13 per cent from December to January, as might be expected, consumers spent 43 per cent more than in January 2021. Spending on holidays (up 379%), airline travel (up 408%) and cruises (up 899%) were the biggest gainers year-on-year, demonstrating the impact lockdown measures have had on households. The total number of non-essential transactions was up by 48 per cent versus last January.

Essential spend in January, while down two per cent from December, was up 15 per cent year-on-year. Travel spend was up 241 per cent year on year while spend on utilities jumped by nine per cent for the same period as energy costs began to bite. Transactions increased by more than a quarter (27%) on 12 months ago.

The rise in spend can also be seen through the ways people make their payments. The number of mobile contactless payments was up 179 per cent versus January last year, with those using their debit or credit cards to tap and go up 61 per cent.

Non-essential spend

Nationwide members spent nearly £2.5 billion in January on non-essential items, based on nearly 85 million transactions:

• Holidays: Nationwide data suggests people started 2022 in a positive frame of mind. Consumers are feeling confident enough to already start to think about and book their holidays for the year, with total spending on airline travel (+408%), cruises (899%) and holidays (379%) all seeing a significant rise compared to January last year. The number of transactions in each of these three categories have risen by 400 per cent or more compared to last year. These are also the only areas where there has been a significant increase in spend in January compared to December.
• Health & Beauty and Clothing & Shoes: As the nation moved into the post-Christmas period and people wanting to reduce non-essential spending, it’s perhaps no surprise to see spending on health and beauty (-23%) and clothing and shoes (-38%) drop compared to December.
• DIY/Home improvements: January saw a small uptick (9%) in spending on DIY and home improvements, suggesting people were looking to start the new year by making improvements to their homes.

Essential spend

Nearly £3.5 billion was spent by Nationwide members on essential items in January with around 94 million purchases made:

• Utilities and bills: Given the continued rising cost of living and with January also including the tax deadline, it’s perhaps no surprise to see there was a 26 per cent month-on-month increase in spending on utilities and bills. Even compared to January last year, spending has risen by nearly one tenth (9%).
• Travel: The Plan B restrictions may be a reason why spending on travel, including public transport, fell slightly month-on-month (-4%) in January, as people continued to work from home where they could. Despite this, spending was still 241 per cent higher than the same time last year.
• Supermarkets: January recorded a post-Christmas comedown when it comes to food and drink, with supermarket spend down 21 per cent compared to December.
• Debt: According to the figures, spending money to pay off existing debts increased in January, by seven per cent vs December and up 22 per cent on the same period last year as people potentially look to start the new year by sorting their finances and paying off debt racked up in the run up to Christmas.

Ways to pay:

Although the month-on-month fall in overall consumer spending saw drops in the amount spent via the different ways to pay, the rise of contactless – accelerated by the pandemic – continued in January. The number of contactless transactions using the mobile phone soared by 179 per cent compared to the same time last year.

Mark Nalder, Nationwide’s Head of Payments, said: “Our latest figures show that people spent more at the start of this year, with consumer spending in January up 18 per cent compared with the same period last year, despite the current rising cost of living. This is also likely to be driven by the 34 per cent year-on-year increase in the number of transactions made by consumers and is perhaps reflective of a country that, despite the Plan B restrictions, is more open for business than it was 12 months ago, when the country was plunged into national lockdown.

“It’s actually non-essential spend that is driving that year-on-year growth. Although it dropped 13 per cent from December to January, as you might expect following the festive period, consumers actually spent 43 per cent more in the first month of this year than 12 months previously. Spending on holidays, airline travel and cruises played a big role in that, as consumers start 2022 in a positive frame of mind about the outlook for Covid-19 and about their travel plans for the coming year.

“The rising cost of living also continues to slowly bite into consumers’ pockets with spending on utilities and bills, including energy, water and tax bills, up more than quarter compared to December, but perhaps more importantly, up nearly 10 per cent on the same month last year. Spending on paying off existing debts, such as credit card bills, also increased in January as people look to try and pay down debt racked up in the run up to Christmas. However, with a 22 per cent increase compared to January last year, people are perhaps starting this year in more debt than they started 2021.

“We expect spending to grow in February as the lifting of Plan B restrictions and the return to offices boosts spending in areas such as travel, eating and drinking and leisure and recreation.”