Discount savvy consumers remain resilient as confidence in personal finances continues to rise

• The latest Deloitte Consumer Tracker shows UK consumer confidence increased for a fifth consecutive quarter to its highest level in two years;
• Consumer sentiment towards household disposable income saw the most significant quarterly improvement, up seven percentage points on the previous quarter;
• Consumers are also feeling significantly more confident in the state of the economy in the UK, improving 32 percentage points compared to a year ago;
• Overall, a higher proportion of consumers purchased items on sale or discount.

UK consumer confidence rose to the highest level in two years in Q4 2023, according to the latest Deloitte Consumer Tracker. Based on responses from 3,187 UK consumers aged 18+ between 29 December 2023 and 1 Jan 2024, consumer confidence rose three percentage points (+2.8) to -11.4%, the fifth consecutive quarter of improved confidence. This is an improvement of eight (+8.3) percentage points on Q4 2022.

Overall confidence was boosted by a seven percentage point (+7.2) increase in confidence in household disposable income (up 20 percentage points year-on-year) as consumers appear increasingly less pessimistic following the easing of inflation and interest rates. However, at -27.7% the net sentiment measure for disposable income remains below its highest level of -10.3% back in Q1 2021, when consumers emerged from the pandemic with record levels of savings.

An uptick in spending on items such as alcohol and tobacco (+11.3 percentage points), clothing and footwear (+7.1 percentage points), and electrical equipment (+5.4 percentage points) led to an overall boost in discretionary spending over the last three months (+3.4 percentage points). Spending on essentials was also higher than the previous quarter (+4.1 overall), namely due to a 21-percentage point increase in utility bills spend over the colder months.

In the final quarter of the year, to save or get more in return 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. Of those consumers who say they spent more in the last three months, 18% attribute this to buying more items because they were on sale or offer - up from 11% in the previous quarter. This trend can also be seen amongst those consumers who report spending less in the last three months, with more (34%) saying this was due to taking advantage of sales and discounts than the previous quarter (29%).

Céline Fenech, consumer insight lead at Deloitte, commented: “We are seeing a more positive and resilient consumer continue to emerge from this prolonged period of high inflation and interest rates, albeit many are continuing with certain recessionary behaviours. While many are feeling more confident in their disposable income, we see that consumers are often making conscious purchasing decisions based on promotions and sales to get the most value in return for their hard-earned money.

“While a fifth consecutive quarter of improved consumer confidence provides an optimistic picture for the year ahead, consumers are likely to remain cautious, resulting in difficult trading conditions until inflation and interest rates fall - possibly in the second half of 2024.”

UK consumers feel less pessimistic about the economy

Consumer confidence about the state of the UK economy has risen to -44%, its highest rate since Q2 2021 and a 14 percentage point increase on the previous quarter. This comes as CFOs state that the threat of high inflation and further interest rate rises has weakened.

Consumers are also feeling more confident in their job security, which rose by four percentage points to -3% from the previous quarter, marking its second highest reading since Deloitte’s Consumer Tracker began in 2011. However, with vacancy rates showing possible signs of slowing, the survey shows only a two percentage point (+1.8) increase in the number of consumers who stated that confidence in their job opportunities and career progression had improved in the last quarter, to -3.6%.

Ian Stewart, chief economist at Deloitte, commented: “Despite slowing growth and high interest rates, consumer confidence remains resilient. The jobs market remains tight and, while unemployment has nudged higher, consumers are feeling more positive about their job security. With the worst of the inflation shock behind us, we see consumer spending starting to pick up in the second half of the year.”

Consumers cut back on leisure spend in favour of summer holidays

After rising for three consecutive quarters, leisure spending fell three percentage points to -11.9%. In the last three months spending across all but one leisure category fell in the final quarter of the year. However, most categories have seen an increase in spending when compared to Q4 2022, particularly eating out (+6.4 percentage points) and spending in coffee/sandwich shops (+5.1 percentage points).

Looking ahead to the next three months, in general, consumers again expect to spend less across leisure, apart from on short and long break holidays – up five and six percentage points respectively – as consumers look to book their summer travel plans.

Simon Oaten, partner for hospitality and leisure at Deloitte, said: “Leisure spending tailing off in the final quarter is a sign of ongoing cost pressures for consumers, who may be compromising on some of their leisure activities to afford spending in other areas. Encouragingly, at the turn of the year we are again seeing increased appetite for spending on holidays as consumers continue to prioritise spending on travel.

“However, there is likely to be a continued focus on securing value for money including booking more all-inclusive trips, holidaying closer to home, reducing the length of trips, seeking cheaper flights or planning holidays outside of the peak season.”

-ENDS-

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 3,187 consumers in the UK aged 18+ between 29 December 2023 and 1 January 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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The information contained in this press release is correct at the time of going to press.
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