Consumer confidence reaches new two-year high amidst improving personal finances

• UK consumer confidence increased for a sixth consecutive quarter to its highest level since Q3 2021;
• Confidence is markedly higher than a year ago, up 6.5 percentage points, particularly in sentiment towards household disposable income;
• Younger people are feeling more positive about their personal finances, as 25–34-year-olds saw a 37 percentage point improvement in confidence towards their levels of disposable income compared to a year ago;
• Falling inflation eases spending on essentials but discretionary spending slows;
• Consumers are feeling less confident about their job security and career progression than last quarter.

The half-percentage-point rise in confidence in the first quarter of 2024, although marginal, marks the sixth consecutive quarter of continued improvement in consumer sentiment. This puts confidence at its highest rate in over two years, according to the latest Deloitte Consumer Tracker, based on responses from 3,198 UK consumers aged 18+ surveyed between 15 and 18 March 2024.

Consumer confidence rose 6.5 percentage points year-on-year, largely driven by a significant improvement in sentiment towards household disposable income (up 18.2 percentage points on Q1 2023). This, paired with a 5.2 percentage point yearly increase in sentiment towards debt levels, paints a much more positive picture of how consumers are feeling about their personal finances.

In particular, younger people appear to be feeling more confident about their personal finances. The biggest quarterly improvement in sentiment towards disposable income was recorded amongst 25–34-year-olds (+8 percentage points). This is even more significant when compared with Q1 2023, with this group having registered a 37 percentage point improvement in sentiment towards their household disposable income, more than double the overall average.

Consumers aged 18-24 and 25-34 are also feeling markedly more confident in their levels of debt compared to a year ago, with 17 and 15 percentage point improvements respectively in their sentiment. This is compared with a 5 percentage point improvement overall.

Though confidence in personal finances is improving, the first quarter of the year has seen the usual post-Christmas cool-off in expenditure, with discretionary spending falling 3.2 percentage points. Meanwhile, spending on essentials has also slowed with utility bills (-5.2 percentage points) and grocery (-4 percentage points) spending falling in the first quarter of the year. However, spending remains at a net positive compared to last year, with essential spending up 0.5 percentage points and discretionary spending up 5.5 percentage points.

Céline Fenech, consumer insight lead at Deloitte, said: “It is encouraging to see that consumers are feeling more confident in their personal finances - particularly younger consumers. Many consumers are paying less for essentials such as utility bills and groceries as inflation falls. However, spending on non-essential goods and services dropped this quarter, meaning that improving confidence is not yet translating to a significant boost to spending, and cautious optimism is required.

“There are some positive signs that consumers might be starting to loosen their purse strings, with more wriggle room for spending on discretionary items or services. We are seeing the rate at which consumers are increasing their defensive behaviours easing, for example fewer consumers buying goods on promotion or from cheaper supermarkets.

“Consumer confidence at its highest level in two-and-a-half years combined with the weather hopefully improving, should signal a brighter outlook for the consumer sector.”

Job sentiment weakens

Despite the overall improvement in confidence, consumer sentiment towards the state of the UK economy declined in the first quarter of the year. This however remained 9.4 percentage points higher than it was a year ago in Q1 2023.

Meanwhile, the number of consumers feeling confident in their job security fell by 2.2 percentage points, following four consecutive quarters of improvement. Similarly, sentiment towards job opportunities fell 1.4 percentage points this quarter amidst a softening labour market.

The overall positive mood of consumers is reflected by that of business leaders as optimism among CFOs at the UK’s largest firms rose for a third consecutive quarter. However, over half (56%) of finance leaders rated reducing costs as a strong priority for the coming months.

Ian Stewart, chief economist at Deloitte, commented: "Consumer confidence is recovering from the shock delivered by the surge in inflation in the last three years. The bad news for consumers in terms of a softer jobs market has been more than offset by the good news in terms of rising real incomes, falling inflation and lower mortgage rates. The revival in consumer confidence speaks to a wider story of an economy that has turned the corner.”

 

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About the 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 3,198 consumers in the UK aged 18+ between 15 and 18 March 2024.

Overall consumer confidence is calculated as an aggregate of six individual measures: job security, job opportunities, household disposable income, level of debt, children’s education and welfare, general health and wellbeing. Since Q3 2019, respondents have been asked their view on the state of the UK economy.

The Deloitte Consumer Tracker began in Q3 2011.

About Deloitte

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Deloitte LLP is a subsidiary of Deloitte NSE LLP, which is a member firm of DTTL, and is among the UK's leading professional services firms.

The information contained in this press release is correct at the time of going to press.
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