Travel spend falls for third consecutive month as lates market stalls

Spending on travel fell for a third consecutive month in May as consumer concerns over the impact of conflict in the Middle East remain high, Barclays disclosed today (Tuesday).

Consumer card spending dropped by 5.8% with holidaymakers still taking a “wait-and-see approach” to their summer plans amid ongoing uncertainty.

Outlay with travel agents was down 5.3% despite a 3.5% rise in transactions, according to the latest data from the bank. Airline spending was down 12.9%, suggesting consumers are putting off international travel, Barclays said.

A fifth of people say they are taking a staycation this year, driven by convenience (46%), a preference for UK trips (35%), cost (33%) and a desire to avoid air travel (30%).

However, May’s sunny weather and the early bank holiday supported several seasonal categories, with spend on hotels and accommodation (2.7%) returning to growth after declining in April.

Barclays said: “Concerns about the impact of the Middle East on costs remain high, but have eased month-on-month, with a lower proportion of consumers concerned about rising energy bills (83% down from 85%) and food prices (82%, down from 84%).

“Two in three (65%) are making financial adjustments in response to current uncertainty, with this group limiting non-essential purchases (45%), takeaways and meals out (42%) and energy use at home (38%).

“Of those making the effort to cut discretionary spending, 35% say their top reason for doing so is to offset an increase in essential costs, while 34% cited building a savings buffer as their main motivation.”

Overall consumer card spending grew 0.8% year-on-year in May, up from April’s 0.1% decline, but still below the latest inflation rate of 3.4%.

Essential spending climbed 0.7%, led by an 11.9% increase in fuel spending, while non-essential spending returned to growth, at 0.9%, after falling 0.3% the previous month.

Consumer confidence in the UK, European and global economies all rebounded in May, returning to the levels seen at the beginning of the year, after declining in March and April.

Consumers’ confidence in their household finances and ability to live within their means improved one percentage point each, to 65% and 70% respectively, while confidence in their ability to spend on non-essential items grew to 52% – up from 49%.

Barclays head of retail Karen Johnson said: “The warmer weather and first May bank holiday gave consumers more reasons to spend in May, particularly on seasonal essentials, UK breaks and affordable ways to enjoy time with family and friends.

“Shoppers are still being careful, with many continuing to build savings and managing subscriptions more closely, but they are also finding room in their budgets for the things that feel good value, convenient or worth prioritising.”

Julien Lafargue, chief market strategist, Barclays Private Bank and Wealth Management, said: “May’s data offers an early sign that household demand may be stabilising, but the macro backdrop remains finely balanced.

“The key question now is whether improving confidence can be sustained, particularly if inflation remains sticky and interest rates trend higher.”