UK consumer confidence has ticked up, even in the wake of the referendum and its resultant uncertainty. Consumption spending is 5.5% on last year, with the South West and Midlands, and the North, seeing the biggest gains. While the previous quarter has seen positive results, the longer term picture is more uncertain, as inflation comes to bite and the fallout from the referendum results take effect.
Consumer sentiment has improved as British shoppers appear unfazed by the referendum results, finds Deloitte’s latest ‘Consumer Tracker’ report. The doom and gloom projected by many is yet to materialise, while shoppers leverage cheap credit and current low inflation levels. The survey, run by YouGov, involved 3,000 British consumers aged 18+.
Consumer confidence has hit the highest level in more than five years, at -5% net of consumers who say that their level of confidence has improved in the past three months. In terms of regional growth in confidence, the Midlands and South West lead, although the North too has seen a considerable boost to sentiment levels. London has seen confidence contract sharply over the past year, as the consequences of Brexit and the price of living in the capital hit home.
A breakdown of confidence into various metrics highlights that there are general positive trends going into the winter, although major factors – such as general health and wellbeing and household disposable income – remain considerably lower in confidence than concern about debt levels or career opportunities and career progression. General health and wellbeing and household disposable income stand at -14% net confidence and -16% respectively, while debt levels and career opportunities and career progression come in at around -5% each. The biggest changes in last quarter’s results are in job security and their children’s education and welfare.
Improved confidence appears to have translated into increased levels of consumer spending, boasting a 5.5% change on the same quarter the year previous. The spending boost is for the most part the result in an uptick in discretionary spending, up 1%, while spending on essential goods has remained relatively flat in the same period. In addition, the research found that consumers are spending more on holidays, in part due to the lower value of the pound, relative to retail spending.
One of the major boosts to consumer spending persistently has been low levels of inflation in recent years, as low oil prices and Quantitative Easing (QE), among others, continue to affect the wider market. Essential items, for instance, continues to see falling prices – down -2.4% last year and -2.2% this year, while clothing & footwear saw a decrease of -1.2% in the most recent period. Prices of furniture & household equipment also fell, down -2.6% since last year.
There are some items that saw increases, with education up 10% vis a vis last year and 4.8% this year, while communication costs have risen by 4.1% in twelve months. Hotels, Cafes & Restaurants too saw increases, up 1.8% on last year and 2.3% on this year. Transportation costs, after a sharp 2.6% decrease last year, saw a slight, 1%, increase this year.
While spending has been pretty rosy in the past months, and consumer sentiment remains relatively high, the longer term picture is more uncertain. Inflation, on the back of higher import costs due to the depreciation of the pound, is likely to be shifted to consumers, resulting in the first hit to the pockets of consumers since the referendum decision. Article 50, the beginning of the Brexit process, is yet to be triggered. The long term consequences of that event, remain unknown, state the researchers.
As it stands, respondents surveyed by Deloitte expect to increase their spending on essentials, while growth in big-ticket item spending will fall slightly.