Inflation and rising bills mean UK households are spending 12% more on essentials than they were a year ago, with almost four in 10 people having to use credit cards to cover these costs, new data shows.
Two days after it emerged that the UK’s annual inflation rate unexpectedly jumped to 10.4% in February, Nationwide said its figures showed that consumers spent 34% more on utility bills and 17% more on mortgage payments last month than they did in February 2022.
The building society analysed 208m debit card, credit card and direct debit transactions made by its members in February, and said that despite the squeeze on finances, spending on some non-essential items such as holidays was continuing to grow, showing that people were looking to strike a balance between being careful and occasionally treating themselves.
However, the building society found that 38% of people had had to use credit cards to pay for essential items such as food, drink, public transport and childcare over the last six months to tide them over until their next payday or benefits payment.
The consumer prices index rose by 10.4% in the 12 months to February 2023, up from 10.1% in January, with prices driven higher by a rise in the cost of drinks, meals out and fresh food. That in turn contributed to the Bank of England’s decision on Thursday to lift interest rates by a quarter of a percentage point to 4.25%.
Nationwide’s analysis of its members’ finances showed that all but one essential spending category – car finance – had experienced annual growth.
Spending on utility bills, such as energy, was up by a third compared with a year earlier, while supermarket spending was up 14%. This mirrors a 14% rise in transactions, showing that despite food and drink prices rising, people are also making more trips. The amount spent on essential travel was 16% higher than a year ago.
The government last week announced a package of state help towards childcare costs faced by parents, and the Nationwide data showed that spending on childcare and education was up 6% year on year.
There was growth in most of the “non-essential” spending categories. Holiday and airline travel spending were significantly higher than in February last year – up 19% and 34% respectively – as people decided to prioritise taking trips now or booking a getaway for later in the year.
Many consumers have clearly also decided they are not going to give up on socialising with family and friends or treating themselves to an occasional meal out or pub visit. Both the amount spent on eating and drinking out and the number of these transactions were up 11% on last year.
Meanwhile, spending on subscriptions such as Netflix and Amazon Prime was down. The total amount that Nationwide customers handed over for these was down by 3% compared with 12 months earlier.
Mark Nalder, Nationwide’s payments strategy and performance director, said that “despite rising costs, households are clearly looking to strike the balance between being fiscally responsible and still being able to spend money on themselves”.
