UK consumer confidence improves despite disposable income worries

By

Barbara Santamaria

Published
Oct 23, 2017

The third quarter of the year saw UK consumer confidence improve by three percentage points compared to the previous quarter, but the figure remains in negative territory as consumers continue to worry about their disposable income.

According to Deloitte’s latest quarterly survey of 3,000 UK consumers, overall consumer confidence rose to -7% quarter-on-quarter, putting an end to a three consecutive quarters of decline. It is the first time consumer confidence has seen a quarterly rise since Q3 2016.

Consumers are feeling more confident about their job security (up two percentage points), job prospects and career progression (up five percentage points), but rising inflation continues to take its toll on consumer budgets.

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Net confidence in household disposable income fell by nine percentage points year-on-year, to -21%, said Deloitte.

Ian Stewart, chief economist at Deloitte, said: “The rebound in consumer confidence testifies to the resilience of the UK consumer in the face of surging inflation, Brexit uncertainties and the prospect of a higher interest rate. The bouncing consumer sentiment mirrors a similar recovery in business confidence since June’s election.

“However, it remains to be seen whether or not this uptick in confidence represents the start of an upward trend. Consumers face growing headwinds with disposable income shrinking, the potential of a first interest rate rise in more than ten years and banks tightening up on consumer lending.”

As a result of these pressures, spending on discretionary categories has fallen by two percentage points since the third quarter of 2016. Among the sub-sectors which have suffered the most are electrical equipment, going out, restaurants and hotels.

Meanwhile, consumer expectations around spending on essentials in the next three months have increased by five percentage points since the third quarter of 2016.

“Consumers are feeling the pinch and are having to make a choice between ‘must have’ and ‘nice to have’ purchases. As we enter the crucial trading quarter for the industry, retailers should expect to see further signs of spending shifting towards essentials such as groceries, utilities and housing over the next three months,” said Deloitte head of consumer business research Ben Perkins.