The Deloitte Consumer Tracker Q4 2018
A worried nation
- Confidence falls for the second consecutive quarter
- Anticipating bad times ahead?
- The last hurrah?
- Uncertainty, uncertainty, uncertainty
- Key contacts
At a glance section
- Overall consumer confidence has declined from -7% to -9% in Q4 2018.
- This fall in overall confidence was primarily due to a decline in sentiment around general health and wellbeing, which fell by 4 percentage points, and lower confidence in levels of disposable income, job security and job opportunities, which each fell by 2 percentage points.
- In the lead up to Christmas, there was the expected seasonal growth in spending for the grocery, clothing and alcohol categories. However, on a year on year basis, spending fell not only on essentials but also on big-ticket items such as electrical goods and furniture.
- The more surprising spending results came from the leisure sector. Net spending in restaurants was up by 6 percentage points while going out was up by 11 percentage points compared with Q3 2018.
- With the UK economic fundamentals remaining solid, and unemployment at historic lows, a reduction in Brexit uncertainties could deliver a rebound in consumer confidence and spending.
Confidence falls for the second consecutive quarter
UK consumer confidence continued to decline in Q4 2018, according to data from the Deloitte Consumer Tracker. Our consumer confidence index fell two percentage points to -9 from -7 in Q3 2018. Confidence has now fallen for the second consecutive quarter, a sign that consumers have become more cautious.
Confidence had been recovering since Q2 2017, reaching its highest ever level in Q2 2018, the quarter that had it all: a royal wedding, England’s performance at the World Cup and some of the hottest weather on record. The good news continued in the autumn with inflation falling, real wages rising and unemployment at historic lows. Theoretically, such strong indicators should have continued to bolster consumers’ confidence. However, with the uncertainty surrounding Brexit reaching new highs, even positive economic news has not been enough to restore their confidence.
Deloitte consumer confidence index
Net % of consumers who said their level of confidence has improved in the past three months
Anticipating bad times ahead?
Deloitte’s overall confidence index is the aggregate of six individual measures: levels of disposable income, levels of debt, job security, job opportunities and career progression, children’s education and welfare, and general health and wellbeing.
This quarter’s fall in overall confidence compared to Q3 2018 was due to a decline in sentiment in five of our six confidence measures.
There was no change in consumer sentiment about levels of debt this quarter after it fell by 5 percentage points the previous quarter, the greatest drop since Q2 2012. Sentiment about levels of debt remaining flat coincided with household borrowing easing, a sign that consumers do not feel now is a good time to take on new financial commitments.
While a 4 percentage point fall in sentiment around general health and wellbeing is attributed to seasonality, confidence in levels of disposable income, job security and job opportunities, which each fell by 2 percentage points, is more worrying. Increasing political uncertainty and negative business reports have had an impact on consumers’ sentiment about their personal finances and job security. The fall in these measures contrasts with macroeconomic indicators that paint a stronger picture for the consumer. In particular, with wage growth having risen to a decade high in October and inflation falling back closer to the two per cent target set by the Bank of England in December, consumers should be receiving decent rises in their real wages.
The last hurrah?
The fall in confidence in personal finances resulted in more muted spending growth than expected in what is known as the golden quarter.
Overall, net spending on essentials and discretionary categories were up by 3 percentage points (to 13 per cent from 10 per cent) and 4 percentage points (to 0 per cent from -4) respectively compared to the previous quarter
We believe that the growth in leisure spending was driven by more than just lower transport and food prices. Consumers prioritised their spending differently and directed more of their cash on experiences while consciously reducing their spending on big-ticket product categories.
These results are aligned
Uncertainty, uncertainty, uncertainty
Consumers enter 2019 in a cautious mood. Prospects for consumer confidence over the next year will be closely linked to how, or indeed if, the UK leaves the EU. With the UK economic fundamentals remaining solid, and unemployment at historic lows, a reduction in Brexit uncertainties could deliver a rebound in consumer confidence and spending.
- Q3 2018 - Loss of momentum
- Q2 2018 - Confidence on the up as consumers defy expectations
- Q1 2018 - Consumer confidence rises, underlying caution remains
- Q4 2017 - Consumers continue to show resilience in the second half of 2017
- Q3 2017 - Consumer confidence recovers after three continuous quarters of decline
- Q2 2017 - Consumer confidence falls to its lowest level in over two years
- Q1 2017 - Consumer confidence softens
- Q4 2016 – Consumer confidence remains undented