Retail spending is struggling

Adjusting for seasonality and prices, spending excluding energy increased by 0.1% in October compared to September, supported by higher service spending but offset by lower retail consumption. Real spending has generally remained flat throughout 2025, with overall levels unchanged from the beginning of the year.

Service spending increased across most categories in October. While spending in cinemas typically rises during the autumn months, both September and October recorded larger-than-usual increases, in nominal terms and adjusted for inflation. Real consumption also went up in restaurants, bars and hotels, while travel related spending was largely unchanged.

Real retail spending saw a 0.6% decline from September to October. The drop was largely driven by reduced spending on clothing and sporting goods, both nominally and adjusted for inflation. However, increased spending on electronics and household appliances, DIY materials, and jewellery helped offset the decline in retail spending to some extent. Nominal grocery spending is up 2.3% y/y, while food prices have risen 4.5% y/y, suggesting that households continue to adjust their shopping behaviours in response to inflationary pressures.

Overall, real spending growth has been subdued in 2025, as consumers maintain a cautious approach to ongoing consumption. Much of the progress seen in retail spending earlier in the year has been reversed, with spending now approaching levels from the start of 2025. We expect consumption to improve in 2026, supported by real income growth, lower income taxes and an additional boost from the sharp reduction in electricity taxes at the turn of the year.

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