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Highlights
- The spending on delayable goods has gone down to 80% of its pre-Covid February 2020 average levels in the week to 21 July 2022, as per ONS.
- The overall consumer spending is becoming more and more skewed towards work-related spending.
- Consumer confidence in the UK has hit a record low level of -19% in the second quarter of 2022, according to Deloitte.
in the UK on non-essential items, like cars, furniture, and apparel, have taken a hit recently. In July, non-urgent spending slumped to its lowest level since February while petrol prices surged. According to the data released by the Office for National Statistics (ONS), the spending on non-urgent or delayable goods went down from 86% of its pre-Covid February 2020 average level to 80% in the week to 21 July 2022.
This data was published not taking inflation into account, which recently hit a fresh 40-year high level of 9.4% in June. Food and fuel bills have been rising across the country and the escalating cost of living squeeze has been hurting the economically weaker households more. As commuting costs have been hitting the roof due to soaring fuel prices, the overall consumer spending is becoming more and more skewed towards work-related spending if the data is adjusted for inflation.
According to the recent official credit and debit card usage data by Reuters, which assumed the same inflation level of 9.4% in July, card spending on fuelling cars was 28% higher than the average February 2020 levels. However, on the other hand, card spending on delayable goods adjusted for inflation, stood at around 28% below if February 2020 average level.
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The big picture presented by this data shows that the UK households are trying to tackle the soaring inflationary pressures, especially the rising energy costs, by bringing alterations in their consumption patterns. A majority of the energy bills paid by households has not been taken into account in the recent card spending data published by the ONS as these bills are generally paid via bank direct debits.
Another similar set of data published by Revolut, which is an online payment provider, showed that household spending on petrol and diesel surged by 48% as compared to the same time last year. Total debit and credit card spending in mid-July was equivalent to the February 2020 levels based on current prices. However, when taking inflation into account, the spending slumped by almost 11%.
The ongoing cost of living squeeze has led to a fall in the overall consumer confidence. As per the latest Consumer Tracker by Deloitte, consumer confidence in the UK has hit a record low level of -19% in the second quarter of 2022. The reason behind the falling confidence is that the purchasing power of consumers has taken a hit due to soaring prices, resulting in a fall in overall spending.
The pessimism among households regarding their disposable income has been growing lately, leading to the overall sentiment to slump to an all-time low of -55% tin the current quarter. Additionally, 62% of UK consumers are now spending more according to the latest tracker, in comparison with 49% at the same time last year.
Out of these, 86% claim that they witnessed a spending rise particularly owing to elevated prices. Taking the whole population into consideration based on this, the rocketing cost of living crisis is now leading to higher spending for 53% of all UK consumers.
Taking all this data into account, UK investors can keep an eye on the following consumer stocks to strengthen their portfolio amid the rising inflationary pressures.
ME Group International plc (LON: MGEP)
The shares of the company operating non-food vending machines, ME Group International plc, were down by 2.23% at 1:00 PM (GMT+1) on Wednesday and were trading at GBX 109.50. With a P/E ratio of 11.06, the company holds a market cap of £423.40m. ME Group International has provided its shareholders with positive returns of 75.00% and 46.25% on year-to-date (YTD) and one-year basis, respectively, as of 3 August.
Lookers plc (LON: LOOK)
The shares of the UK-based car dealership chain, Lookers plc, were down by 2.32% at 1:05 PM (GMT+1) on Wednesday and were trading at GBX 80.10. With a P/E ratio of 5.30, the company holds a market cap of £321.72m. Lookers has provided its shareholders with positive returns of 19.10% and 14.45% on YTD and one-year basis, respectively, as of 3 August. The company is currently offering a dividend yield of 3.0% to investors on yearly basis.
Anglo Eastern Plantations plc (LON: AEP)
The shares of the UK-based palm oil and rubber maker, Anglo Eastern Plantations plc, were down by 0.22% at 1:08 PM (GMT+1) on Wednesday and were trading at GBX 902.00. With a P/E ratio of 4.75, the company holds a market cap of £358.31m. Anglo Eastern Plantations has provided its shareholders with positive returns of 24.72% and 50.17% on YTD and one-year basis, respectively, as of 3 August. The company is currently offering a dividend yield of 0.5% to investors on yearly basis.
British American Tobacco plc (LON: BATS)
The shares of the UK-based cigarette maker, British American Tobacco plc, were down by 0.02% at 1:28 PM (GMT+1) on Wednesday and were trading at GBX 3,265.00. With a P/E ratio of 14.24, the company holds a market cap of £73,600.74m and falls under the FTSE 100 index. British American Tobacco has provided its shareholders with positive returns of 19.44% and 21.19% on YTD and one-year basis, respectively, as of 3 August.
Tate & Lyle plc (LON: TATE)
The shares of the UK-based provider of food and beverages, Tate & Lyle plc, were down by 0.05% at 1:32 PM (GMT+1) on Wednesday and were trading at GBX 800.00. With a huge P/E ratio of 189.89, the company holds a market cap of £3,214.48m and falls under the FTSE 250 index. Tate & Lyle has provided its shareholders with positive returns of 3.70% on YTD basis but its one-year return stands in the negative zone as of 3 August, at -6.99%. The company is currently offering a dividend yield of 2.9% to investors on yearly basis.
Compass Group plc (LON: CPG)
The shares of the UK-based contract foodservice business, Compass Group plc, were down by 0.10% at 1:46 PM (GMT+1) on Wednesday and were trading at GBX 1,930.50. With a P/E ratio of 46.99, the company holds a market cap of £34,194.89m and falls under the FTSE 100 index. Compass Group has provided its shareholders with positive returns of 16.99% and 27.16% on YTD and one-year basis, respectively, as of 3 August. The company is currently offering a dividend yield of 1.2% to investors on yearly basis.
Imperial Brands plc (LON: IMB)
The shares of the UK-based tobacco manufacturer, Imperial Brands plc, were down by 0.27% at 1:49 PM (GMT+1) on Wednesday and were trading at GBX 1,824.00. With a P/E ratio of 8.58, the company holds a market cap of £17,382.96m and falls under the FTSE 100 index. Compass Group has provided its shareholders with positive returns of 12.51% and 17.10% on YTD and one-year basis, respectively, as of 3 August. The company is currently offering a dividend yield of 7.6% to investors on yearly basis.
Frasers Group plc (LON: FRAS)
The shares of the retail and intellectual property company, Frasers Group plc, were down by 1.35% at 1:55 PM (GMT+1) on Wednesday and were trading at GBX 879.00. With a P/E ratio of 15.03, the company holds a market cap of £4,254.33m and falls under the FTSE 250 index. Frasers Group has provided its shareholders with positive returns of 14.27% and 45.02% on YTD and one-year basis, respectively, as of 3 August.
Reckitt Benckiser Group plc (LON: RKT)
The shares of the UK-based consumer goods business, Reckitt Benckiser Group plc, were up by 0.15% at 1:58 PM (GMT+1) on Wednesday and were trading at GBX 6,750.00. With a P/E ratio of 15.87, the company holds a market cap of £48,220.20m and falls under the FTSE 100 index. Reckitt Benckiser Group has provided its shareholders with positive returns of 6.43% and 20.21% on YTD and one-year basis, respectively, as of 3 August. The company is currently offering a dividend yield of 2.6% to investors on yearly basis.
A G Barr plc (LON: BAG)
The shares of the British soft drink maker, A G Barr plc, were down by 0.18% at 2:02 PM (GMT+1) on Wednesday and were trading at GBX 545.00. With a P/E ratio of 21.89, the company holds a market cap of £611.68m. A G Barr has provided its shareholders with positive returns of 5.60% on YTD basis but its one-year return stands in the negative zone as of 3 August, at -3.36%. The company is currently offering a dividend yield of 2.2% to investors on yearly basis.