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Consumer confidence falls to 18-month low

  • UK consumer confidence falls for a second consecutive quarter from -7% in Q3, to -9% in Q4 2018: the lowest level in 18 months;
  • YoY confidence in levels of disposable income and job security down by four percentage points;
  • Spending on essentials and discretionary items increase but growth more muted than expected considering the lead up to Christmas;
  • The Deloitte Consumer Tracker measures UK consumer confidence on a quarterly basis.

UK consumer confidence dropped to an 18-month low in the last quarter of 2018, falling to -9% from -7% the previous quarter, according to the latest Deloitte Consumer Tracker.

The analysis, based on the responses of over 3,000 UK consumers between 4 and 7 January 2019 found that, despite a period of falling inflation, a rise in real wages and unemployment at historic lows, this was not enough to offset consumer uncertainty surrounding Brexit.

Confidence was down, year-on-year, across five of the six measures used to calculate the Deloitte confidence index. The fall in confidence was most pronounced in sentiment around levels of disposable income and job security (-4 percentage points, equally). Quarter-on-quarter comparison reveals confidence was also down across five of the six measures, with only confidence in debt levels remaining flat.

Ian Stewart, chief economist at Deloitte, commented: “Recent data, in the form of record employment, higher earnings and falling inflation are great news for UK consumers. But consumers are more focussed on Brexit worries at home and the clouds gathering over the global economy. Work may be easier to find than for decades and pay may be rising, but today’s decline in confidence shows that consumers spirits are heavily influenced by expectations.”

Christmas spending slows
The Deloitte Consumer Tracker also revealed an increase in net spending on both essentials and discretionary categories, increasing by three and four percentage points respectively, compared with the previous quarter.

Ben Perkins, head of consumer research, commented: “Although quarterly spending for essentials and discretionary items increased, the fall in overall confidence resulted in more muted spending growth than expected during the ‘golden’ quarter in the run up to Christmas.

“Based on the Tracker’s findings this quarter, it seems that consumers are anticipating bad times ahead, despite the backdrop of positive macro-economic data. Notably, spending fell across certain essential categories, such as housing or transport, and on big-ticket items such as electrical goods and furniture.

“Consumers have entered 2019 in a cautious mood. As a result, we expect spending to continue to slow, especially in the big-ticket discretionary categories.”

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