Q2 Consumer confidence marginally improves on record low, but economic concerns remain

• Second quarter sees UK consumer confidence climb just one percentage point, to -17%, from record low; 
• Sentiment around state of the economy fell a further 17 percentage points from the previous quarter, to -88%;
• However, lockdown created a nation of savers with sentiment around level of debt and household disposable income both improving from last quarter; and
• Consumers hint at Q3 bounceback with net intent to spend rising quarter-on-quarter across every discretionary category.
• The Deloitte Consumer Tracker measures UK consumer confidence on a quarterly basis.

UK consumers emerge from Q2 in a cautious but slightly more positive mood, following a record decline in consumer confidence in the first quarter of the year, according to the latest Deloitte Consumer Tracker. Despite significant caution on the state of the economy, and continued concerns about job security and career progression, consumers intend to start spending again in the quarter ahead, albeit below year-on-year comparables.

Deloitte’s analysis is based on responses of more than 3,000 UK consumers between 19th and 23rd June 2020, as some the UK’s lockdown measures were lifted and non-essential shops reopened.

Limited spending opportunities over lockdown saw many consumers use the period to boost individual savings. At the same time, government-backed furloughing protected a large proportion of individual earnings during lockdown and, subsequently, consumer pockets. Quarter-on-quarter confidence around levels of debt rose five percentage points, to -1%, with household disposable income sentiment seeing an 11 percentage point rise, returning to the same level as this time last year. However, with year-on-year job security, and career progression sentiment down 13 points (to -20%) and 21 points (to -22%), respectively, caution remains.

The impact of COVID-19 on the economy also came into sharp focus, with consumer sentiment on its state seeing the most notable decline. Having started the year with record low unemployment rates, a separate Deloitte survey shows that 90% of CFOs now expect a reduction in hiring over the next 12 months.

Ian Stewart, chief economist at Deloitte, commented: “Following a huge contraction in March and April, activity is seeing a post-lockdown bounce. However, with confidence about the economy at record lows and high levels of concern about jobs and health, consumer spending is unlikely to return to pre-pandemic levels until next year at best.”

Primed to spend
Essential spending over lockdown was largely confined to grocery and utility bill categories, with quarter-on-quarter net discretionary spending down almost across the board. However, with non-essential shops reopening and restrictions on movement easing, consumers expect their spending to increase over the next three months. In retail, intended clothing and footwear spend is up +43 percentage points on the previous quarter.

Ben Perkins, head of consumer research, commented: “Whilst recovery on the high street is unlikely to be immediate, consumers are primed to spend. Shop reopening coinciding with some seasonal discounting could also draw more shoppers back and tap into the pent up demand. While online sales reached record highs over lockdown, it remains to be seen if this trend will continue, prompting many retailers to revisit and innovate their online store experience.”

Consumers seek a taste of normality
The Tracker revealed that, having stayed home for most of Q2, consumers are eager to start spending again in the leisure sector over the coming quarter. Net spending intent for Q3 is highest in the restaurant and going out categories, up quarter-on-quarter by +65 and +60 percentage points, respectively. Whilst 31% of consumers indicate they would visit pubs and coffee shops within a month of reopening, the figure is lower for restaurants (22%) suggesting recovery may come later in Q3 and beyond.

Simon Oaten, partner for hospitality and leisure at Deloitte, said: “The leisure sector was among the first to be impacted by the COVID-19 pandemic, as opportunities to travel and spend on out-of-home activities were limited. Social distancing may slow recovery but, after many months at home, the jump in consumers wanting to drink out again suggests many are seeking a taste of ‘normality’. Whilst restaurant returns may be slower, many in the leisure sector will be encouraged by incoming government initiatives that should help the industry rebound in the short-term.”

Consumers indicate a slower recovery in the travel industry as intended spending on holidays and hotel stays, whilst up +38 percentage points from Q1, remains in negative territory (at -3%) and is yet to reach the same level as this time last year.

Oaten continued: “With the possibility of an economic downturn and a second wave of the virus, consumers will probably remain cautious about their discretionary spending as they wait and watch.”

End

Notes to editors

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 more than 3,000 consumers in the UK aged 18+ between 19th and 23rd June 2020. 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. Respondents have been asked their view on the state of the UK economy from Q3 2019.

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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