Download - The Deloitte Consumer Tracker Q3
The Deloitte Consumer TrackerConsumer confidence sees its largest increase in 18 months
Overall consumer confidence (q/q)*
Previous
Latest
-8%-5%
Confidencein level ofjob security (q/q)*
Previous
Latest
-10%-4%
Essentialsspending(q/q)*
Previous
Latest
+5%+5%
Discretionaryspending(q/q)*
Previous
Latest
-3%-2%
ONS retailsales value growthAug-16 (y/y)
Previous
Latest
+0.9%+3.9%
CPI inflation Aug-16 (y/y)
Previous
Latest
0%+0.6%
Key indicators
*Net balances
Q3 2016
Chart 1. Deloitte consumer confidence Net % of consumers who said their level of confidence has improved in the past three months
-20%
-15%
-10%
-5%
0%
Q316
Q216
Q116
Q415
Q315
Q215
Q115
Q414
Q314
Q214
Q114
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Q411
Q311
In a sign that Brexit fears have been put to one side Deloitte’s consumer confidence index rose by three percentage points quarter-on-quarter, its largest increase in 18 months.
Chart 2. UK consumer sentiment about personal situationNet % of consumers who said their level of confidence has improved in the past three months
-50%
-40%
-30%
-20%
-10%
0%
10%
Your children’s education and welfareYour job opportunities/career progressionYour level of debtYour job securityYour general health and wellbeingYour household disposable income
Q316
Q216
Q116
Q415
Q315
Q215
Q115
Q414
Q314
Q214
Q114
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Q411
Q311
Five out of the six measures which make up the confidence index rose between the second and third quarters.
There were strong gains in consumer confidence regarding job security, job opportunities and career progression.
Chart 3. Consumer confidence in job securityNet % of UK consumers who said their level of confidence in job security has improved over the past three months
-20%
-10%
0%
Your job security
Q316
Q216
Q116
Q415
Q315
Q215
Q115
Q414
Q314
Q214
Q114
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Q411
Q311
-15 -15
-10-11
-10-12
-10 -10
-7 -7 -7-5 -5
-4 -4 -4 -4-3
-4-6 -6
The job security index rose by six percentage points compared to the last quarter after having fallen for three consecutive quarters.
Chart 4. Consumer confidence by regionNet % of UK consumers who said their level of confidence has improved over the past three months
-20%
-15%
-10%
-5%
0%
LondonLondon and South EastMidlands and South WestNorth
Q316
Q216
Q116
Q415
Q315
Q215
Q115
Q414
Q314
Q214
Q114
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Q411
Q311
Confidence among Londoners fell by three percentage points this quarter and is now nine percentage points lower than it was a year ago.
In the meantime, confidence in the North is at its highest since the series began.
Chart 5. Consumer confidence in job security by regionsNet % of UK consumers who said their level of confidence in job security has improved over the past three months
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
LondonLondon and South EastMidlands and South WestNorth
Q316
Q216
Q116
Q415
Q315
Q215
Q115
Q414
Q314
Q214
Q114
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Q411
Q311
Londoners were also less confident about the security of their jobs.
Given the capital’s dependence on financial services, a Brexit-led downturn could weaken its economy leading to job cuts, falling house prices and a decline in business activity.
Chart 6. Uncertainty% CFOs who rate the level of external financial and economic uncertainty facing their business as above normal, high or very high
Source: Deloitte CFO Survey
45%
55%
65%
75%
85%
95%
Q310
Q316
Q216
Q116
Q415
Q315
Q215
Q115
Q414
Q314
Q214
Q214
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Q411
Q311
Q211
Q111
Q410
Uncertainty among the Chief Financial Officers of the UK’s largest corporates remains high post-Brexit.
Chart 7. Consumer expenditure % change y-o-y, final consumption expenditure, constant prices, SA
Source: ONS
-6%-5%-4%-3%-2%-1%0%1%2%3%4%5%
Q216
Q215
Q214
Q213
Q212
Q211
Q210
Q209
Q208
Q207
Q206
Londoners were also less confident about the security of their jobs.
Given the capital’s dependence on financial services, a Brexit-led downturn could weaken its economy leading to job cuts, falling house prices and a decline in business activity.
Chart 8. Essentials vs discretionary spending in the last three monthsNet % UK consumers spending more by category
-20%-15%-10%
-5%0%5%
10%15%20%
Q316
Q216
Q116
Q415
Q315
Q215
Q115
Q414
Q314
Q214
Q114
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Q411
Q311
Essentials Discretionary
However, expenditure continues to shift from essentials to discretionary categories. Net spending on essentials was flat for the second consecutive quarter, while net spending on discretionary categories rose by one percentage point.
Chart 9. Category spending in the last three monthsNet % UK consumers spending more by category
-30%-25%-20%-15%-10%
-5%0%5%
10%15%20%
Q316
Q216
Q116
Q415
Q315
Q215
Q115
Q414
Q314
Q214
Q114
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Q411
Q311
Retail spending Leisure spending
Moreover, the gap between leisure and retail spending is narrowing as consumers continue to favour spending on experiences such as holidays rather than on goods.
Chart 10. Retail sales% change in volume and value year-on-year
Value Volume
Aug AugAugAugAugAugAugAugAugAugAug-4-202468
101214
1615141312111009080706
The strength of consumer spending is reflected in the growth of retail sales since the beginning of 2016, with a 5.5 per cent rise in the three months to August 2016 compared to a year earlier.
Chart 11. Inflation% change year on year
Source: ONS
-4 -2 0 2 4 6 8 10
Food & Non-alcoholic beverages
Clothing & Footwear
Furniture & Householdequipment
Housing, Water & Fuels
Total inflation
Recreation & Culture
Miscellaneous goods& Services
Transport
Alcoholic beverages& Tobacco
Health
Hotels, Cafes& Restaurants
Communication
Education
15/08/16 15/08/15
4.810
4.11.1
2.31.82
1.81.4
2.11
0.80.8
0.7
0.6
0.4
0.4
0.6
-2.6
-2.4-2.2
--1.2
-2.6
-0.1
-0.9
Inflation remains low across most categories, with competition continuing to keep prices down in the grocery sector.
However, while overall inflation in August remained flat at 0.6 per cent, it has been rising since the start of 2016.
Chart 12. British pound sterling effective exchange rate index
Sep SepSepSepSepSepSepSepSepSepSepSepSepSepSepSepSepSepSepSep
Source: Bank of England
707580859095
100105110
97 16151413121110090807060504030201009998
UK retailers have seen their costs rise as a result of the introduction of the new higher minimum wage and the fall in the value of sterling.
The key question for retailers is how much of these increased costs they will be able to pass on to consumers while still protecting their margins.
Chart 13. % Growth in average wages vs CPI Inflation% change year-on-year
Aug AugAugAugAugAugAugAugAugAugAug
Source: Thomson Reuters DataStream.
-4
-2
0
2
4
6
8
1615141312111009080706
UK inflation (CPI)Average earnings including bonuses
An extended period of falling prices, which has enabled consumers to increase their consumption despite subdued wage rises, could be drawing to an end.
UK consumer credit – Net unsecured lending to individuals (%y-on-y)
Chart 14. Consumer creditSecured and unsecured lending to individuals (% change year-on-year)
Source: Thomson Reuters DataStream
Aug AugAugAugAugAugAugAugAugAugAug-4-202468
101214
1615141312111009080706
UK personal borrowing: Dwellings – Net lending (%y-on-y) SADJ
Consumer borrowing remains high as the UK shopper defies pessimistic post-referendum forecasts.
Chart 15. Unemployment rate% change year-on-year
Source: Thomson Reuters DataStream
Jun JunJunJunJunJunJunJunJunJunJun1615141312111009080706
0
2
4
6
8
10
UK LFS: unemployment rate, all, aged 16 & over SADJ
The unemployment rate has continued to decline and stood at 4.9 per cent in the three months to June 2016.
Chart 16. Category spending over the next three monthsNet % UK consumers spending more by category
-25%-20%-15%-10%
-5%0%5%
10%15%
Q316
Q216
Q116
Q415
Q315
Q215
Q115
Q414
Q314
Q214
Q114
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Q411
Q311
Essentials Small-ticket items Big-ticket items
Consumers in our survey expect to spend more on essentials in the next three months.
Chart 17. Consumer indicators% change year-on-year
Unemployment
June 15
June 16
5.5%4.9%
Average weekly earnings growth rate
July 15
July 16
2.9%2.3%
Interest rates
Sep 15
Sep 16
0.5%0.25%
With the consumer-focused economic fundamentals still showing few signs of a slowdown since the end of June, we expect retail sales growth to continue into the fourth quarter.
Chart 18. UK GDP growth: Actual and forecast (%)
Quarter-on-quartergrowth
Year-on-yeargrowth
Source: ONS, consensus forecasts from The Economist and Deloitte calculations
20172016201520142013201220112010200920082007-7
-6-5
-4-3
-2-1
01
23
4 Forecasts
Growth forecasts remain positive with GDP expected to increase by 1.7 per cent in 2016, although slowing to 0.7 per cent in 2017.
Looking further ahead, two events could pose challenges to consumer spending power and sentiment: the prospect of higher inflation and the start of the formal Brexit process in 2017.
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About this researchThe Deloitte Consumer Tracker is based on a consumer survey carried out by independent market research agency, YouGov, on our behalf. This survey was conducted online with a nationally representative sample of over 3,000 UK adults aged 18+ between 16 and 19 September 2016.
A note on the methodologySome of the figures in this research show the results in the form of a net balance. This means that in a survey of 100 respondents, assume that 30 reported they are spending more, 50 reported no change and 20 reported they are spending less. The net balance is calculated by subtracting the number that reported they spent less from the number that reported they spent more, i.e. 30 – 20 = 10. This means 10% of consumers reported that they spent more rather than less.