Following the Price Rise, British Households Have Cut Back on Their Consumption of Beer, Meat and Household Appliances

British households have cut back on their consumption of beer, bread, meat, leisure activities and household appliances since the end of 2021, according to an analysis of official data by the Financial Times that highlights the impact of the cost of living crisis on consumption.

Real consumer spending in the UK has not yet returned to pre-pandemic levels, lags behind the US and the euro zone and has fallen in the final three months of 2023, underlining the challenge facing Prime Minister Rishi Sunak in getting there is about creating a feel-good factor in the economy before the pandemic election.

An analysis of detailed consumer spending shows that in the two years to the final quarter of 2023, British households reduced their purchases of beer by 15 percent, confectionery by 10 percent, meat by 7 percent and bread and fruit by 9 percent each, according to Office for National figures Statistics and data on gross domestic product.

The trend partly reflects the impact of the pandemic, as consumers return to spending more on services and less on goods, but it mainly reflects weaker purchasing power driven by higher prices. The rise in interest rates to a 16-year high has also hit household finances, driving up mortgage costs and rents.

Consumers spent 15 percent more despite buying 0.5 percent fewer goods in the two years ending in the fourth quarter of 2023, the most recent quarter for which data is available.

Household spending on gas rose nearly 70 percent, but consumers purchased 10 percent fewer quantities. The amount of food purchased by consumers also fell by 8 percent, although spending on groceries increased by 16 percent in the last two years.

“The cost of many essential goods such as energy and food has risen dramatically over the past two years, and wages have not kept pace with the sharp rise in prices. Given household budget constraints, something had to give,” said Tomasz Wieladek, chief European economist at investment firm T Rowe Price.

As a result, “households have had to cut back on many non-essential goods and luxury services, as well as energy consumption, and forego more expensive branded foods.”

UK consumer price inflation reached 11.1 percent in October 2022, its highest level in 42 years, while real wages contracted for most of 2022 and 2023. Inflation fell to 3.2 percent in February, but prices are still about 20 percent above their average. Levels 2021.

ONS data shows inflation-adjusted spending on household appliances such as coffee machines and dishwashers fell 19 per cent in the two years to the end of 2023 and was 8 per cent below pre-Covid levels.

Real spending on furniture fell 9 percent, with fewer purchases of cars, plants, jewelry and insurance. Housing spending was hit by the housing market downturn last year and the “race for space” at the height of the pandemic.

Overall, real household spending in the last three months of 2023 was 2.4 percent below its level in the same period of 2019. This compares with an increase of 8 percent in the four years to the end of 2019.

According to official data, British households were doing worse than others. In the US, real consumer spending rose 10 percent in the final three months of 2023 compared to pre-pandemic levels, and Britain’s performance was weaker than the euro zone and Canada.

The sharper fall in U.K. consumer spending is “likely largely due to the U.K.’s higher and longer-lasting inflation problem,” said Ruth Gregory, an economist at research firm Capital Economics, pointing out that prices rose faster in Britain than in the euro zone and the USA last year.

“The UK experienced the worst of both worlds, a major energy shock like the eurozone and worse labor shortages like the US,” she added.

Wieladek said the decline in consumption was particularly significant in an expected election year, as stressed households would “blame the authorities.”

With the Conservative Party trailing Labor by around 20 points in opinion polls, Sunak is hoping for better economic conditions to support his election campaign.

Gregory said it “would make sense for Sunak to wait as long as possible” before traveling to the country, adding: “The recession in the consumer sector may be over and the recovery will gain momentum from the second quarter.”

ONS data shows higher food and energy prices left little room for other purchases in the two years to the end of 2023: Inflation-adjusted spending on personal care, which includes hair and nail salons, fell 4 percent. Spending on leisure and culture also fell, including an 18 percent decline for sports equipment and a 5 percent decline for games and hobbies.

Education and communications recorded an increase in real spending over the same period and compared to pre-pandemic levels, reflecting long-term changes in consumption habits. Real spending on travel and dining increased compared to the end of 2021, but was still below the level of the fourth quarter of 2019.

Mark Boyd-Boland, partner at consultancy LEK, said that as well as cutting discretionary spending, consumers were also “trying to moderate their supermarket purchases” by buying and up “a few less nice things”. Supermarket owners had downgraded. Label articles.

Boyd-Boland said that while the point at which “household budgets will feel better” is approaching, the benefits of lower inflation will come to fruition “Due to the ongoing impact of the rate hikes, it will take some time to get through.”