Airlines were dealt another big blow in July as spending on holidays, in real terms, sank as inflation reached 40-year highs.
Barclaycard debit and credit card data showed a 7.7% increase in overall spending compared with the previous year - but this figure excluded inflation.
This data would likely represent a 2% reduction in real terms if inflation hits 9.7% as expected by Martin Beck, EY Item Club chief economic advisor. It stood at 9.4% in June.
This added to the airlines’ recent woes after a summer of chaos with tens of thousands of flights cancelled due to staff shortages.
Airlines were told by regulators to take further measures to reduce cancellations.
IAG, owner of British Airways (LON:ICAG), EasyJet PLC and Wizz Air Holdings PLC (AIM:LON:WIZZ) all eased 0.8%.
Real spending was also falling for shopping and going out as Britain’s largest business lobby group called for government action to aid households.
"We simply cannot afford a summer of government inactivity while the leadership contest plays out followed by a slow start from a new prime minister and cabinet," Tony Danker, director general of the Confederation of British Industry (CBI), said.
The Bank of England recently predicted the economy will enter a recession in the last quarter of 2022 and last for just over a year as energy bills continue to skyrocket. It also forecast that inflation will hit 13%.
Also, surging petrol prices contributed toward a 30% year-on-year (YoY) jump in fuel outgoings, while utility bill spending soared 44%.
July retail sales rose 2.3% YoY, according to the British Retail Consortium (BRC), but the figures “masked a much larger drop in volumes once inflation is accounted for.”
Meanwhile, non-food retail sales in the three months to July declined by 2% as shoppers watched their pockets.
“With inflation at over 9%, many retailers are still contending with falling sales volumes during what remains an incredibly difficult trading period,” Helen Dickinson, BRC chief executive, commented.