Apr 24, 2023
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Deloitte consumer confidence index shows sentiment improving but a thrifty mindset

Apr 24, 2023

Consumer confidence in the UK is rising, but it remains low, new reports have shown. GfK’s monthly report on Friday showed a jump in March but a still-negative reading. And on Monday, the latest quarterly report from Deloitte talked of confidence rising for second consecutive three-month period “amidst improved economic sentiment”.

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Deloitte said Q1 confidence improved by two percentage points and consumer sentiment towards the state of the economy “rose sharply in the first quarter following the latest Budget”.

But while it means some consumers will loosen their purse strings and many “intend to spend more across all leisure categories in the next quarter”, they’re still cutting back in key areas.

“A third of consumers have or will switch to cheaper brands and stores to combat cost of living,” Deloitte said.

Overall confidence was lifted quarter-on-quarter by improved consumer sentiment towards job opportunities and progression (+3.6 percentage points) and general health and wellbeing (+4.4 percentage points), against the backdrop of a strong labour market and the winter months coming to an end.

However, in a sign that consumers remain vulnerable to ongoing economic headwinds, overall confidence remains down year-on-year. 

Persistent inflation continues to depress people’s sentiment about their levels of disposable income which, despite improving from Q4 2022, remains lower than when the Deloitte Consumer Tracker survey first launched back in 2011.

The Deloitte Consumer Tracker is based on responses from 3,212 UK consumers aged 18+ surveyed between 17 and 20 March, after the Chancellor’s Budget announcement. 

Consumer sentiment towards the UK economy increased 21 percentage points in Q1, but still sat at only -55.6%. Sentiment in job security saw a two-percentage point increase compared with the last quarter as the labour market remained robust.

Deloitte also said that despite falling energy prices, with food inflation continuing to rise, spending on essentials rose for a third consecutive quarter, up 1.7 percentage points from Q4 2022. Meanwhile, in a sign that many households remain cautious when spending on non-essentials, spending on discretionary items fell by one percentage point from the previous quarter.

And while fewer are doing so, consumers have continued to adopt more “recessionary behaviours”. Some 34% of respondents said they’ve switched, or are intending to switch, to cheaper products such as value or own-brand ranges in order to cope with the increased cost of living. In addition, a growing proportion of consumers said they have, or plan to, take advantage of sales and discounts (33%, up from 30% last quarter) and shop at cheaper stores (30%, up from 28% last quarter).

Céline Fenech, consumer insight lead at Deloitte, said: “Many consumers continue to adopt different shopping tactics to combat high prices.

“With food inflation persisting, we see many households sacrificing non-essential items in order to afford everyday goods that are most vulnerable to price hikes. Where they must spend, consumers continue to take advantage of sales and discounts, while cheaper stores and own-brand ranges also remain important for the price-sensitive shoppers looking to get the most value for their money.”

One bright spot is the aforementioned desire of consumers to spend more on leisure activities. 

Deloitte’s Consumer Tracker revealed a rise in quarter-on-quarter net spending on leisure in Q1, up 1.6 percentage points. The quarterly increase was boosted by a net 7.8 percentage point increase in spending on holidays and hotels by consumers compared to the last quarter of 2022.

That should mean more consumers needing to update their holiday wardrobes.

However year-on-year, overall net spending on leisure activities was down, with every single leisure category seeing a decline. This was particularly evident in categories including ‘eating and drinking out’, down 9.2 percentage points year-on-year, and ‘culture and entertainment’, down 7.5 percentage points year-on-year.

But respondents indicated that they plan to spend more on leisure in the next quarter, with intended net spending for Q2 up across every leisure category.

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