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The Deloitte Consumer Tracker Q3 2017

Consumer confidence recovers after three continuous quarters of decline

October 2017

After a nine month decline, consumer confidence has risen in the third quarter of 2017 in a sign that consumers are showing resilience at a time when Brexit and other factors could be causing uncertainty. This quarter-on-quarter growth has occurred against a well-publicised backdrop of high levels of unsecured debt and rising inflation.

Consumer confidence starts to recover

Consumer confidence shows tentative signs of recovery. Although still remaining in negative territory, the tracker reports a three percentage point increase in confidence for the third quarter of 2017.
 

Consumers are showing resilience

This quarter has seen significant growth in five of the six measures that drive consumer confidence, with confidence in job security and job opportunities/career progression returning to levels last seen before the EU referendum in 2016.
 

Pessimism over debt levels

Consumers are increasingly pessimistic about their levels of debt, with net confidence falling four percentage points compared to last year. Household disposable income is also an area of concern with net confidence falling by nine percentage points compared to the third quarter of 2016.

The squeeze on disposable incomes

Concerns about these rising debt levels and the growing disparity between earnings growth and inflation has created a squeeze on disposable income, meaning that consumers are having to make a choice between essential and discretionary purchases. As a result, spending has declined in discretionary categories such as electric equipment, going out and restaurants and hotels compared to last year. Consumers are expecting to spend more on essentials such as groceries, utility bills and housing in the next three months.
 

Looking ahead

With inflation well above the target rate of 2%, the Bank of England has resisted the urge to raise interest rates above their all-time low of 0.25%. The prospect of an interest rate rise in the coming months remains a real possibility. Rising interest payments at a time when consumers are concerned about their debt levels could lead to a downturn in confidence and a further squeeze on spending.

Deloitte Consumer Tracker Q3 2017

A note on the methodology

Some of the figures in this research show the results in the form of a net balance. This means that in a survey of 100 respondents, assume that 30 reported they are spending more, 50 reported no change and 20 reported they are spending less. The net balance is calculated by subtracting the number that reported they spent less from the number that reported they spent more, i.e. 30 – 20 = 10. This means 10% of consumers reported that they spent more rather than less.

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