After a nine month decline, consumer confidence has risen in the third quarter of 2017 in a sign that consumers are showing resilience at a time when Brexit and other factors could be causing uncertainty. This quarter-on-quarter growth has occurred against a well-publicised backdrop of high levels of unsecured debt and rising inflation.
3. 3
Consumer confidence recovered 3 percentage points over the last quarter
Consumer confidence is up compared to the previous quarter for the first time in a year. However, it
is down by 2 percentage points compared to Q3 of last year.
-18%
-15%
-14%
-15%
-13%
-15%
-12%
-10%
-8%
-11%
-7%
-6%
-5%
-8%
-5%
-7%
-5%
-7%
-8% -8%
-5%
-6%
-7%
-10%
-7%
-20%
-18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
Q12013
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
-2%
+3%
Source: Deloitte Consumer Tracker Q3 2017
Q3 2017 Deloitte Consumer Tracker
Overall consumer confidence
4. 4
The growth in consumer confidence is driven by various factors
Five out of six measures of confidence have seen growth in the last quarter, with people
particularly optimistic about their children’s education and welfare, as well as job security and
their own job opportunities and career progression.
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
Your job security
-18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
Your level of debt
-20%
-15%
-10%
-5%
0%
Your general health and wellbeing
-8%
-6%
-4%
-2%
0%
2%
4%
Your children’s education and
welfare
-50%
-40%
-30%
-20%
-10%
0%
Your household disposable income
-20%
-15%
-10%
-5%
0%
Your job opportunities/career
progression
Source: Deloitte Consumer Tracker Q3 2017
5. 5
Confidence has improved across all age groups
18-34 year olds remain the most confident, but 35-54 year olds have seen the biggest quarter on
quarter growth in confidence.
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
18-34 35-54 55+
+4%
Source: Deloitte Consumer Tracker Q3 2017 Q3 2017 Deloitte Consumer Tracker
Deloitte consumer confidence age group
6. 6
Levels of consumer confidence vary across income bands
Despite reporting positive confidence (+4%), high earners have actually seen a decline in their
confidence compered to the previous quarter. Whilst those earning under £10k have seen significant
growth quarter on quarter (+16% points).
-40%
-30%
-20%
-10%
0%
10%
20%
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Deloitte consumer confidence income group
Under £10k £10k to £25k £25k to £50k £50k to £100k Above £100k
+16%
Source: Deloitte Consumer Tracker Q3 2017 Q3 2017 Deloitte Consumer Tracker
7. 7
There is increased confidence amongst the UK’s lower socio-economic groups
Although still displaying lower confidence than the AB & C1 groups, lower socio economic groups
DE & C2 both saw significant increases in their confidence.
-30%
-25%
-20%
-15%
-10%
-5%
0%
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Deloitte consumer confidence social grade
AB C1 C2 DE
+7%
Source: Deloitte Consumer Tracker Q3 2017 Q3 2017 Deloitte Consumer Tracker
8. 8
The year-on-year confidence picture is more mixed
Compared to Q3 2016, 4 out of 6 measures have fallen, 1 has improved and 1 has remained the
same. The fall in confidence in disposable income is the most significant decline reported (-9
points).
-15% -16%
-13%
-6%
-43%
-16%
-10% -10%
-12%
-1%
-33%
-10%
-5%
-8% -7%
2%
-25%
-6%
-4% -3%
-9%
3%
-18%
0%
-3%
-1%
-11%
2%
-13%
-1%
-4% -3%
-10%
3%
-12%
-3%-4%
-7%
-12%
1%
-21%
-1%
-50%
-40%
-30%
-20%
-10%
0%
10%
Your job security Your level of debt
Your general health and
wellbeing
Your children’s education
and welfare
Your household disposable
income
Your job
opportunities/career
progression
Net confidence total
Q3 2011 Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017
Source: Deloitte Consumer Tracker Q3 2017 Q3 2017 Deloitte Consumer Tracker
9. 9
Unemployment continues to fall with a 40 year low of 4.3% reported in both June and
July 2017
However, this is not having the expected positive impact on wages.
0
1
2
3
4
5
6
7
8
9
Source: Thomson Reuters Q3 2017 Deloitte Consumer Tracker
UK LFS: Unemployment rate, all, aged 16 & over seasonally adjusted
10. 10
Consumers are feeling a squeeze as average earnings growth runs lower than inflation
The gap between growth in earnings and inflation continues, meaning that consumers are
beginning to experience a squeeze on their spending power.
-3
-2
-1
0
1
2
3
4
5
6
% Growth in average wages vs. CPI Inflation
Average earnings including bonuses Uk Inflation (CPI)
Source: Thomson Reuters Q3 2017 Deloitte Consumer Tracker
11. 11
There is some optimism about the recovery of the Savings ratio from a low in Q1
However, taking a longer term view, we can see that the ratio is still much lower than previous
years.
0
2
4
6
8
10
12
14
Saving ratios
Source: Thomson Reuters Q3 2017 Deloitte Consumer Tracker
12. 12
On top of a real-wage squeeze and low levels of saving, consumers are also having
to deal with growing debts
Although growth in unsecured household lending has tailed off in 2017, it remains higher than at
any time pre 2016.
-4
-2
0
2
4
6
8
10
12
Aug2007
Oct2007
Dec2007
Feb2008
Apr2008
Jun2008
Aug2008
Oct2008
Dec2008
Feb2009
Apr2009
Jun2009
Aug2009
Oct2009
Dec2009
Feb2010
Apr2010
Jun2010
Aug2010
Oct2010
Dec2010
Feb2011
Apr2011
Jun2011
Aug2011
Oct2011
Dec2011
Feb2012
Apr2012
Jun2012
Aug2012
Oct2012
Dec2012
Feb2013
Apr2013
Jun2013
Aug2013
Oct2013
Dec2013
Feb2014
Apr2014
Jun2014
Aug2014
Oct2014
Dec2014
Feb2015
Apr2015
Jun2015
Aug2015
Oct2015
Dec2015
Feb2016
Apr2016
Jun2016
Aug2016
Oct2016
Dec2016
Feb2017
Apr2017
Jun2017
Aug2017
Secured and Unsecured lending to household
UK CONSUMER CREDIT-NET UNSECURED LENDING TO INDIVIDUALS(%YOY) UK PERSONAL BORROWING: DWELLINGS - NET LENDING (%YOY) SADJ
Source: Thomson Reuters Q3 2017 Deloitte Consumer Tracker
13. 13
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
Net confidence your level of debt social
grade
AB C1 C2 DE
-25%
-20%
-15%
-10%
-5%
0%
5%
Net confidence your level of debt
household profile
No children Children
-25%
-20%
-15%
-10%
-5%
0%
5%
Net confidence your level of debt home
ownership
Non-Home Owners Home Owners
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Net confidence your level of debt income
group
Under £10k £10k to £25k £25k to £50k
£50k to £100k Above £100k
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
Net confidence your level of debt age group
18-34 35-54 55+
-25%
-20%
-15%
-10%
-5%
0%
5%
Net confidence your level of debt London vs
rest
North Midlands and South West
London and South East London
As a result, consumers are showing decreasing levels of confidence in their levels of
debt
Despite their overall improvement in confidence, young people are increasingly concerned over
their levels of debt.
Source: Deloitte Consumer Tracker Q3 2017
14. 14
Economic factors mean that consumers are displaying more defensive shopping
behaviours
Expansionary behaviours are down for the third consecutive quarter and back to levels last seen
two and a half years ago (Q1 2014).
21%
22%
23%
24%
25%
26%
27%
28%
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Defensive Expansionary
Source: Deloitte Consumer Tracker Q3 2017
Q3 2017 Deloitte Consumer Tracker
15. 15
And consumers are expecting to feel a squeeze on their spending
Consumers expect to spend more on essentials and less on big-ticket items in the next three
months.
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Essentials
Small-ticket items
Big-ticket items
Source: Deloitte Consumer Tracker Q3 2017
Q3 2017 Deloitte Consumer Tracker
Next three months
16. 16
This trend towards greater spend on essentials is even more pronounced when looking
at a year-on-year view
Consumers expect to spend more on essentials (Groceries, Utility Bills, Housing) in the next 3
months and less on discretionary items compared to Q3 2016.
16%
-12%
-17%
4%
29%
-16% -16%
11%
-3%
-15%
-18% -18%
-1%
-13%
12%
-12%
-15%
5%
30%
-14% -14%
5%
-2%
-15% -15% -15%
-2%
-13%
7%
-9%
-12%
5%
20%
-11% -12%
3%
-1%
-12%
-14%
-11%
0%
-8%
3%
-10% -11%
3%
14%
-10%
-12%
-1% -1%
-13%
-11%
-8%
-2%
-7%
5%
-8%
-6%
3%
13%
-8%
-10%
3%
-2%
-10% -9% -8%
0%
-4%
12%
-10% -11%
5%
25%
-10% -9%
7%
1%
-10%
-13% -12%
1%
-5%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Grocery
shopping for
food and non-
alcoholic
beverages
Alcoholic
beverages and
tobacco
Clothing and
footwear
Housing (e.g.
rent, mortgage,
maintenance)'
Utility bills (e.g.
water, electricity,
gas and other
fuels)'
Furniture and
homeware
Major household
appliances (e.g.
washing
machine, fridge,
cooker, vacuum
cleaner, etc.)'
Transport Landline/mobile
phone, Internet
and cable/TV
subscriptions'
Electrical
equipment (e.g.
PCs/laptop,
television,
mobile phone
device, etc.)'
Going out (e.g.
cinema, theatre,
concerts, etc.)'
Restaurants and
hotels (eating
out and short
break)
Pensions and
insurance
Holidays (long
break)
Net spending next 3 months total
Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016 Q3 2017
Source: Deloitte Consumer Tracker Q3 2017
Q3 2017 Deloitte Consumer Tracker
17. 17
As well as reigning in their spending, consumers are concerned about the overall
prospects for the economy over the next 12 months
Despite a recovery in consumer confidence, consumers are cautious about prospects for the year
ahead.
-60
-50
-40
-30
-20
-10
0
10
20
01/08/2007
01/11/2007
01/02/2008
01/05/2008
01/08/2008
01/11/2008
01/02/2009
01/05/2009
01/08/2009
01/11/2009
01/02/2010
01/05/2010
01/08/2010
01/11/2010
01/02/2011
01/05/2011
01/08/2011
01/11/2011
01/02/2012
01/05/2012
01/08/2012
01/11/2012
01/02/2013
01/05/2013
01/08/2013
01/11/2013
01/02/2014
01/05/2014
01/08/2014
01/11/2014
01/02/2015
01/05/2015
01/08/2015
01/11/2015
01/02/2016
01/05/2016
01/08/2016
01/11/2016
01/02/2017
01/05/2017
01/08/2017
UK CONS. SVY. - GFK GENERAL ECO SITUATION OVER NEXT 12 MOS. NADJ
Source: Thomson Reuters
Q3 2017 Deloitte Consumer Tracker
18. 18
Summary
The calm before the storm? Consumer confidence is up compared to Q2 2017, but there is
reason to be cautious about the next three months and beyond.
• Consumer confidence has grown compared to the previous quarter
o However, confidence is still negative and is down year-on-year
• The economy is struggling to improve post EU referendum
o Unemployment is at an all-time low, but this is not stimulating wage growth
o Inflation is well above the BoE’s target
• Consumers and lenders are rightly concerned about debt
o Unsecured borrowing has grown steadily since 2013
o The ability of consumers to pay off these debts is in question
o There is a real possibility of interest rate rises in the near future
• Concern over debt is starting to have an impact on consumer spending
o Consumers expect to make less discretionary purchases in the next three
months
o The gap between expansionary and defensive shopping behaviour is
narrowing
Given the concerns about debt and
disposable income, it is not clear
whether the growth in consumer
confidence represents the start of an
upward trend, or rather an anomaly
in a long-term downward trend.
Q3 2017 Deloitte Consumer Tracker