Travel remained a consumer priority in July, experiencing a 14.3% increase in spending and a 12.5% uptick in transactions, with travel agents and airlines both enjoying noticeable uplifts of 7.8% and 39.1% respectively as holidaymakers make plans for the rest of the year, despite lingering concerns around the cost of living.
It sets the sector back on track after growth in spending with agents slowed in June despite a strong summer lates market and healthy travel demand and intent. Prior to this, spending on airfares and agencies took another big leap in May, outpacing all other areas of consumer spending.
Overall consumer card spending grew by 4% year-on-year in July – below both the latest Consumer Prices Index inflation rate of 7.3% and the growth recorded by Barclays in June (5.4%) as shoppers continue to spend cautiously.
And despite a steady increase in spending, Barclays said concerns around food pricing and the rising cost of living meant just one-in-five Brits feels confident in the strength of the UK economy, down 2% month-on-month.
Spending on non-essential items grew by 5.6% year-on-year in July, with the hospitality and leisure sector enjoying a boost as Brits made the most of the summer, albeit during a dismal July weather-wise.
Abbas Khan, UK economist at Barclays, said during the first half of 2023 high inflation rates have weighed on real household disposable incomes and constrained consumption.
"On the bright side, this headwind is expected to abate over H2 as inflation in essential categories such as energy and food is set to ease," said Khan, adding that while Barclays does not expect a consumer recession in the coming months, growth is likely to be "meagre".
The rebound in spend with agents underlines some of the findings from TTG’s Travel Agent Tracker during the first half of the year. In Q1, 16% of agents said their average price per head was up to £1,000; this fell to 14% in Q2, indicating fewer agents are operating in this lower price bracket – hinting at an increase in overall spending.
In addition, 10% of respondents to the Q1 Tracker said clients spent less than they did during the same period last year, which fell to 8% in Q2 2023 vs Q2 2022, again pointing towards spending strengthening in the second quarter.
Meanwhile, fewer agents discounted by more significant amounts during Q2. In Q1, 20% of agents discounted by between 6-10% and 3% by 10% or more. In Q2, 16% of agents discounted by between 6-10% and 4% by in excess of 10%, meaning 3% fewer agents respondents were discounting at higher levels overall.
