The Bank of England’s aggregate credit and debit card spending data (CHAPS) is arguably the best real-time indicator of how the consumer is reacting to the easing of lockdown conditions.
Following the April 12th easing, delayable spending rose substantially above pre-pandemic levels as non-essential stores were reopened and pent-up demand was released. Since, spending on delayable items such as clothing and household goods remains above pre-pandemic levels, albeit at a lower level than the aftermath of the first stage of reopening.
Expectations were that social spending would recover to above pre-pandemic levels in a similar vein as the May 17th reopening saw indoor dining and hospitality reopen. However, this wasn’t visible in last week’s spending data as social spending underwhelmed at just 83.5% of February 2020’s average.
This weighed on aggregate spending, which has struggled to break above pre-pandemic levels since May 11th, despite the latest easing that took place.
Social spending fails to rebound with the same vigour as delayable spending did as consumers remain hesitant on social travelling
Other notable data points, such as restaurant bookings and seated diners, suggest that social travel is the reason why social spending in the CHAPS data continues to sit below pre-pandemic averages.
In the week to Monday 24 May, estimated seated diners was at 132% of the level seen in the same week in 2019. This is the highest level since the 31st August 2020, around the time the Eat Out to Help Out Scheme was in place.
Taken on the whole, the release bodes well for May’s GDP rebound as consumption remains robust, however, the real-time data continues to underperform as consumers remain hesitant to take public transport in order to spend.
For sterling, a definitive trend that outlines how robust the economic recovery is set to be in the coming months is yet to be visible in the real-time data. This means, more traditional hard data points that are released with a lag are likely needed for the pound to break out of its current holding pattern and carve a fresh trend.
Author: Simon Harvey, Senior FX Market Analyst