The Deloitte Consumer Tracker Q4 2023

UK consumer confidence increased to its highest level in two years

The latest Deloitte Consumer Tracker shows UK consumer confidence increased for a fifth consecutive quarter, rising by three percentage points to -11.4% its highest level in two years. The sustained improvement in the index since Q4 2022 coincides with a period that saw the rate of inflation easing from a peak of 11.1% in October 2022. Stronger consumer sentiment reflects better financial conditions including the rise of real wages since June 2023 and mortgage rates falling from their peak last summer. However, the lag effect of interest rate hikes has meant that rental inflation and rising unemployment are hitting consumer spending, with December retail sales suffering their fastest drop since January 2021. Consumers are likely to remain cautious resulting in difficult trading conditions until inflation falls back further and central banks start to lower interest rates.

The Deloitte Consumer Confidence Index1

Net % of consumers who said their level of confidence has improved in the past three months

1 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.

Key findings in Q4 2023

  • UK consumer confidence increased for a fifth consecutive quarter, rising by three percentage points to -11.4% its highest level in two years. Since reaching an all-time low in Q3 2022 the Deloitte Consumer Confidence Index has risen by nine percentage points over the last 15 months to -11.4% in Q4 2023.
  • The rise in overall confidence was driven by quarter-on-quarter improvements in five out of six measures of confidence included in the index.
  • With easing inflation supporting the rise of real wages, consumer sentiment towards household disposable income saw its second most significant quarterly improvement since the Tracker began in 2011, up seven percentage points on the previous quarter. However, at -27.7% the net sentiment measure for disposable income remains below where it was in Q1 2021 (-10.3%) when consumers emerged from the pandemic with record levels of savings.
  • In a sign of households’ financial conditions gradually improving, when asked about the state of their personal finances in the last three months, on balance consumers are not only reporting an increase in their wage and savings, but their overall expenditure is also stabilising and their levels of debts are increasing at a slower rate.
  • Consumers also reported their most positive views about the state of the UK economy since Q2 2021 when it fully reopened following the pandemic, with a 14.4 percentage point increase to -44% in Q4 compared with Q3 2023.
  • With the job market remaining buoyant, sentiment about job security jumped four percentage points to -2.8%, its second highest reading since the Tracker began. However, with vacancy rates showing possible signs of slowing, the measure of confidence in job opportunities and career progression grew by only 1.8 percentage points to -3.6%.
  • As would be expected during the busiest trading quarter of the year for the consumer sector, our spending sentiment data shows that on balance both essential and discretionary spending were up in Q4 2023.
  • However, our data shows that in Q4, to save or get more for their money, more consumers bought goods on promotion, took advantage of loyalty schemes or shopped on the second-hand market compared with the previous quarter.
  • Consumers are likely to remain cautious resulting in difficult trading conditions until inflation falls back further and central banks start to lower interest rates.

Individual measures of consumer confidence

Net % of consumers who said their level of confidence has improved in the past three months

*Please note this measure is not included in the overall index

Consumer spending in the last three months

Net % of UK consumers spending more by category over the last three months

Consumer attitudes to finances and spending in Q4 2023

Thinking about your financial situation and spending habits in the last three months compared with the previous four to six months, did you see an increase or decrease in each of the following, or did they remain about the same?

Cost reduction and increasing cash flow continue to top the priority list for businesses

Improving consumer confidence, especially around personal finances, will be encouraging for consumer businesses. The overall positive mood of consumers is reflected by CFOs at some of the UK’s largest businesses. According to the latest Deloitte CFO survey, sentiment among CFOs rose for the second consecutive quarter as inflation and interest rates have dropped down the CFOs’ list of worries. CFOs now expect wage and price pressures to continue to ease. However, CFOs foresee growth ahead but not imminently. Perceptions of external financial and economic uncertainty have risen, and are running at above-average levels. CFOs think geopolitics poses the greatest external risk to their own business over the next 12 months. Given the mixed outlook, businesses will remain focussed on cutting costs and building up cash rather than hiring, capital spending or M&A.

Outlook for 2024

Despite real incomes rising since June 2023, consumers continue to make up for the shortfall experienced in their purchasing power while inflation was running higher than wages. In addition, with the lag effect of rising interest rates, geopolitical uncertainties and the prospect of a general election, consumers are likely to remain cautious for at least the first part of 2024. Conditions could improve in the second half of 2024: reductions in national insurance, possible tax cuts in March’s budget and inflation expected to ease further should continue to support rising real income and lead to households starting to spend more in the bigger-ticket discretionary categories. In addition, the housing market is showing signs of stirring with mortgage rate reductions leading to a rise in mortgage approvals.

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About this research

The Deloitte Consumer Tracker is based on a consumer survey carried out by independent market research agency, YouGov, on Deloitte’s behalf. This survey was conducted online with a nationally representative sample of more than 3,000 UK adults aged 18+ between 29th December 2023 to 1st January 2024.

A note on the methodology

Some of the figures in this research show the results in the form of a net balance. This is calculated by subtracting the proportion of respondents that reported feeling more negative from the proportion that reported feeling more positive. For instance, assume that 30% of respondents reported they are spending more, 50% reported no change and 20% reported they are spending less. The net balance is calculated as 30% – 20% = 10%. This means 10% of consumers reported that they spent more rather than less.

Key contacts

Céline Fenech

Research Manager

Dominic Graham

Managing Partner Consumer