Consumer confidence falls for second consecutive quarter
Of the Consumer Tracker’s seven measures of confidence, sentiment around the state of the economy recorded the largest quarter-on-quarter decline, falling eight percentage points
The Deloitte Consumer Tracker has revealed UK consumer confidence fell by one percentage point in Q4 2021 to -11%, the second consecutive quarter of decline.
Deloitte said the result comes after consumers started to feel the “squeeze of inflation” and pockets were hit with higher household bills. Personal expenditure in the final quarter of 2021 increased for two in five (41%) consumers, up from one in three (36%) in Q3. Of these, three-quarters (74%) revealed it was due to rising prices.
The Deloitte Consumer Tracker is based on responses from 3,177 UK consumers between 31 December 2021 and 5 January 2022, against the backdrop of rising Omicron variant cases and with consumers living under ‘Plan B’ Covid-19 restrictions.
Of the Consumer Tracker’s seven measures of confidence, sentiment around the state of the economy recorded the largest quarter-on-quarter decline, falling eight percentage points.
This fall marks the lowest reading since Q1 2021, when the UK was under strict lockdown measures. However, the fall in sentiment amongst consumers is in stark contrast to business executives who intend to make increased capital investment a strong priority for the year ahead.
Deloitte added that with essential spending “set to take precedence” over discretionary spending in the quarter ahead, consumers are signalling that holidays and socialising could be delayed, despite pent-up demand.
It said consumers indicated that their intended spending on discretionary items will fall by nine percentage points in Q1 2022. This is more pronounced in social categories, including going out and eating at restaurants, down -20 and -17 percentage points respectively. Whilst overall consumer spending on essential goods and services will remain flat in Q1 2022, utility bill expenditure specifically is expected to increase by nine percentage points, quarter-on-quarter.
Céline Fenech, consumer insights lead at Deloitte, said: “With the expected squeeze on spending power and higher inflation, another fall in confidence may dent the hopes of a consumer recovery. However, some consumers are still in the fortunate position of having higher levels of savings compared to before the pandemic, indicating some financial resilience.
“The further easing of restrictions should also support an improvement in sentiment, in turn boosting spending. However, this may not occur until inflation has peaked so the critical question in the meantime is whether consumers can afford to continue spending.”
Ian Stewart, chief economist at Deloitte, added: “Sharply higher inflation and a squeeze on consumer spending power has hit consumer confidence. With inflation set to rise further a tough few months are in prospect. However, high savings, strong consumer balance sheets and rising employment should help soften the blow to spending caused by higher inflation.”
