Consumer confidence amongst 18 to 34 year-olds is at highest level recorded;
- Five out of six confidence measures have seen positive year-on-year growth;
- Net spending on essential items grows by seven percentage points from Q3;
- The Deloitte Consumer Tracker measures UK consumer confidence on a quarterly basis.
The UK’s consumers remained confident in the fourth quarter of 2016, according to the latest Consumer Tracker report from Deloitte, the business advisory firm.
The quarterly survey of 3,000 UK consumers, which was carried out between 31 December 2016 and 2 January 2017, found that although overall consumer confidence in Q4 2016 fell slightly, by one percentage point from the previous quarter (-5% to -6%), it remains higher than during the same period in 2015.
Significantly, five out of the six measures which make up the confidence index have seen positive year-on-year growth in Q4 2016. Consumers remain confident about the outlook for jobs, with sentiment around career progression improving while views on job security remain unchanged.
According to the Consumer Tracker, confidence among 18-34 year-olds is as its highest level since the Tracker began six years ago. This recovery has been largely driven by growing confidence around disposable income and debt, with 18-34 year-olds’ sentiment about job security having improved for two consecutive quarters.
Overall consumer confidence on disposable income fell marginally in Q4, by two percentage points from the previous quarter (-12% to -14%), and is now three percentage points lower than it was in Q4 2015.
Ian Stewart, chief economist at Deloitte, said: “So far, Brexit has not dented consumers’ confidence about the outlook for jobs, particularly among younger workers. Rising real wages, credit growth, high employment and rather more positive business confidence*have bolstered consumer spirits and have kept consumer confidence levels stable, and higher than 12 months previously.
“However, the New Year sees the arrival of headwinds that may challenge the current consumer-friendly economic conditions.
“Falling confidence about disposable income may be a sign that we are seeing the start of a squeeze on household incomes. Rising inflation, largely driven by the weakening pound in recent months, will also put pressure on real incomes and consumer spending in 2017.”
The Q4 Consumer Tracker also showed that consumer net spending grew in the fourth quarter. Discretionary net spending rose by two percentage points from the previous quarter (0% to 2%), and net spending on essentials grew considerably, rising by seven percentage points from Q3 2016 (5% to 12%).
Ben Perkins, head of consumer research at Deloitte, commented: “Consumers did not rein in their spending in the final months of the year, and we saw a significant uplift in essentials spending in the lead up to Christmas.
“This growth was mainly driven by increased spending on groceries and utilities, with grocery retail in particular benefiting from volume growth. Overall, the retail sector ended the year on a positive note, with many retailers reporting a bumper fourth quarter.
“However, the consumer market will have to cope with a number of significant headwinds over the next 12 months. Confidence may be rocked by the combination of rising costs of goods and services, caused by inflation, and a possible slowdown of wage growth. This may impact consumers’ spending power and their willingness to spend on non-essential discretionary items in the first half of 2017.”