30th September 2026
Britain's consumers are spending more.
That is the headline from the latest Office for National Statistics figures, with household spending estimated to have increased by 0.3% in real terms between April and June and by 1.2% compared with the same quarter last year.
At first sight, that sounds like welcome news. Consumers are spending, shops and businesses are receiving the money and the economy is growing.
But there is a question worth asking before we celebrate.
Does higher consumer spending actually mean British households are better off?
The answer is not necessarily.
There is an important point in the ONS figures which is easily missed. The 0.3% quarterly increase is a real measure. In other words, ONS has removed the effect of price increases from the calculation. It is therefore not correct to say that the entire increase is simply because everything costs more.
But that still leaves a much bigger question about what is happening to household finances.
The ONS measure records how much households are spending on goods and services. It does not tell us that every household has more money available to spend, nor does it tell us how comfortable people feel about their finances.
A household can increase its spending because it has higher income. But it can also spend more because it is using savings, taking on more debt, delaying other purchases or simply having to devote more of its budget to particular essentials.
The distinction matters.
If a family has to spend more on energy, insurance, food, transport and other necessities, its total spending can remain high even if it has less money available for the things it actually wants.
And that is where the national statistics can sometimes give a rather different impression from life at household level.
The latest ONS figures show that the largest contributors to the quarterly increase in household spending were clothing and footwear, restaurants and hotels, and housing.
That suggests there was some genuine additional consumer activity during the quarter.
But a 0.3% increase in real spending is hardly evidence of a consumer boom.
Indeed, it is worth remembering the scale of the increase. A household spending 0.3% more in real terms over three months is a very small change. It indicates that spending has increased, but it does not tell us that households have suddenly become confident or prosperous.
The wider economic figures reinforce that point.
Real household disposable income per head increased by 1.0% in the second quarter, according to the ONS, but the household saving ratio also increased to 8.8%.
That is interesting because households appear to have been putting more aside at the same time as spending increased.
Perhaps that is a sign of greater financial security.
It could also reflect continuing caution after several years of high inflation, with households trying to rebuild savings rather than immediately spending every additional pound.
There is another problem with interpreting national spending figures.
Britain does not have one typical household.
A pensioner living alone, a young couple renting a flat, a family with a mortgage and children, and a high-income professional household can all experience the economy very differently.
Average household spending can therefore rise even if a significant proportion of households are cutting back.
This is particularly important after the inflation shock of recent years.
Prices do not have to continue rising rapidly for households to remain under pressure. If the price of food, energy, insurance and other necessities has already moved substantially higher, households must continue paying those higher prices even when the annual inflation rate comes down.
That is why falling inflation does not mean prices have fallen.
It simply means they are rising more slowly.
The ONS itself produces separate Household Costs Indices because different types of households experience changing prices differently. In June, the annual household-cost inflation rate was 2.8%, compared with 2.6% for CPI. Transport costs, particularly fuel, were becoming a more important contributor.
For someone living in rural Caithness, that distinction can be particularly important.
A household that depends on a car cannot simply decide not to buy fuel because the national inflation rate has fallen. Someone living in an older rural property may also have fewer alternatives when energy costs rise.
So when we hear that consumer spending is increasing, perhaps the better question is:
What are people spending their money on, and what is left after they have paid for the essentials?
That is much closer to the question ordinary households are asking themselves.
There is also an important economic point.
Consumer spending is a major component of GDP. If households spend more, it contributes to measured economic growth. That means rising consumption is generally welcomed by economists.
But there is a difference between spending that reflects rising prosperity and spending that reflects households having to pay more for necessities.
There is also a difference between spending more because people are confident about the future and spending more because they have decided they can no longer postpone replacing something they need.
The latest figures do not tell us which explanation applies to every household.
What they do tell us is that real household consumption increased slightly in the second quarter.
That is useful information.
But it should not automatically be translated into "Britons are better off."
The ONS is measuring economic activity, not happiness, financial security or whether people have enough money left at the end of the month.
Perhaps that is the real lesson from these figures.
**A rise in consumer spending is good for GDP.
But it is not necessarily proof that the consumer is better off.**
To understand that, we need to look beyond how much Britain spends and ask how much households earn, how much they have to spend on essentials, how much they are saving or borrowing, and what their money will actually buy.
Those are rather different questions.
And for many households, they may be the questions that matter most.
Read the ONS report HERE