Summer Spending gives UK Economy a Boost
If you’ve been enjoying an alfresco drink and barbeque in the last few weeks, you’re one of many! Brits have spent £158 million more on alcohol this summer than we did in 2016, according to the market researcher, Kantar Worldpanel. Sales of sun-care products, unsurprisingly, were also up by 40%, as people scrambled to protect their skin from the hottest June day in 40 years. These improved sales have added up to a significant boost to flagging supermarket profits, which have increased by 3% or more for the fourth consecutive period.
Reasons for the Boost
There is more to this boost than a bit of sunshine, however. A combination of hot spells, and a series of popular sporting events have created the perfect conditions for increased spending. Events such as Wimbledon, the British Grand Prix, and the British and Irish Lions rugby tour have encouraged many of us to indulge in a little seasonal tipple, whether in the heat of the action or whilst watching from home. The most popular summer drinks proved to be cider and gin, sales of which were up 20% and 29% respectively. Soft drinks sales have also risen substantially in the past few months, along with fresh beef burgers, prepared salads, and fruit and veg. This summer feast would apparently be incomplete without ice-cream, sales of which rose by 34% in June alone. The sun has also encouraged us to spend more on the high-street – investing in cooler clothing. Spending on shoes and clothes in 2017 has shot up by 11.6% compared to last year.
Are we splurging too much?
All this suggests that the warmer weather and host of exciting events have wooed us into a spending splurge, which could be bad news as living costs continue to rise, with wages failing to keep up. In fact, there is ample evidence to suggest, despite their penchant for tipple and ice-cream, that shoppers are generally being more careful with their money than ever before. The amount consumers are spending on supermarket own-brand products increased by 7% this year alone, implying that savvy shoppers are switching to cheaper alternatives for more and more of their staple buys. With this increase, own-brand products now account for 51% of the average UK grocery shop. Droves of us are also abandoning the bigger supermarkets in favour of discount retailers such as Aldi and Lidl. The pair saw much larger growth than rivals Tesco and Asda this year, as Aldi reported growth in its market share of 17.9%, and Lidl edged ahead boasting a 19.4% increase. In fact, Lidl now controls 5% of the UK grocery market, and looks set to overtake its more upmarket rival, Waitrose.
Food prices on the rise
These savings are pretty much a necessity for many customers, since inflation is sitting at the high level of 2.9%, pushing up the cost of our weekly shops. The rising price of groceries is even slipping ahead of overall inflation, rising by about 3.2% year on year. This figure adds roughly £133 to the cost of our shopping each year. This isn’t helped by the fact that many products also appear to be getting smaller. If you have ever opened up a bar of chocolate and thought, ‘I’m sure these used to be bigger’, you might be relieved to hear that you are not losing your mind, nor getting nostalgic. The Office for National Statistics (ONS) have identified 2,529 products which have decreased in size over the last five years, in a process dubbed ‘shrinkflation’. This is technically a type of inflation, since products become more expensive per gram- companies just choose to decrease the size of the product, instead of raising its price. Manufacturers have argued that this change is better for consumers, since the products affected, generally confectionary, tend to be selected for their price rather than size.
If manufacturers thought consumers wouldn’t notice these changes, though, they were wrong. Last year die-hard chocolate fans were outraged when the confectionary giant, Mondelēz, reduced the weight of Toblerone bars by changing their iconic shape. Interestingly, this change has inspired the discount retailer, Poundland, to attempted to cash in on this indignation, by planning to launch a copycat product called Twinpeaks, which retains Toblerone’s original weight per bar. Sharing bags of Malteasers have also fallen prey to the phenomenon of ‘shrinkflation’, with bag sizes decreasing by 15% over the past five years. Savoury snacks have not escaped ‘shrinkflation’ either – a packet of Dorritos now weighs 180g, rather than its former 200g. The consumer group Which? has been keeping a keen eye on this trend, and found that food products are not its only victims. Adrex toilet rolls have reduced in size by 8%, whilst Dettol has reduced the number of antibacterial wipes in a packet from 36 to 32. Of course, these are small changes, which only the most eagle-eyed of us would notice, but small changes add up. ‘Shrinkflation’ cannot shield us from the knowledge that essential products are becoming ever more expensive, as our disposable income dwindles.
The summer spending splurge is a real boost to the economy- the hike in supermarket spending especially. However, there are plenty of signs that despite the seasonal treats, most of us are continuing to squeeze more from our food budgets, as essential purchases continue to rise in price.
If you need more information about the options available to you in dealing with your debt, you can always speak confidentially with one of our friendly advisors on 0808 2085 198.