According to a new report from Deloitte, consumer confidence in the UK is expected to decrease, which will have a negative impact on Christmas spending. Although this news is not surprising given the increasing prices, Deloitte’s report offers a slightly more optimistic viewpoint compared to the previous report from GfK.
The Deloitte Consumer Tracker conducted a survey with 3,185 UK consumers between September 17 and 20, revealing a one percentage point decrease in consumer confidence in the third quarter. This decline is the first quarterly fall recorded this year. The report highlights a decrease in optimism regarding personal finances, particularly in the areas of debt and disposable income.
One notable indication of the rising prices in discretionary and essential categories is that 36% of consumers reported overall increased spending in the past three months. This increase was primarily driven by higher utility bills and transportation expenses as more employees returned to the office. However, as prices continue to rise, respondents expressed their intention to reduce spending in the next three months, including during the festive season. In fact, discretionary spending in the fourth quarter is expected to decrease by five percentage points compared to the third quarter.
Despite the projected decline in spending, the report suggests that this is a normalization of spending patterns leading into the retail sector’s “golden quarter” encompassing the holiday season. This decline follows the high spending levels observed in the second and third quarters. Ben Perkins, head of consumer research at Deloitte, explains that factors such as the end of the furlough scheme, the removal of universal credit top-ups, and rising inflation have contributed to the decline in consumer confidence.
Perkins also notes that consumers still have a strong desire to celebrate Christmas after many plans were canceled last year due to the pandemic. However, concerns about the availability of certain products are already impacting consumer behavior. Some shoppers have begun their Christmas shopping early to avoid potential disappointment.
For retailers, an extended Christmas shopping period can present advantages. It allows for the distribution of demand over a longer timeframe, leveling out peaks and potentially reducing the need for price discounts. In anticipation of ongoing disruptions in the supply chain, some retailers have already stocked their stores with Christmas merchandise to ensure that consumers can find what they need for the festive season. However, there is a possibility of longer-term disruptions that could result in shortages of popular items like clothing, toys, and furniture, affecting retailers’ ability to meet consumer demand.
In conclusion, the new consumer confidence report from Deloitte offers a somewhat less pessimistic outlook compared to previous assessments. While confidence has declined and the outlook for Christmas spending is weaker, it is seen as a normalization of spending patterns after the higher levels seen earlier in the year. Retailers are preparing for potential disruptions and shortages, hoping to meet consumers’ demand during the festive season.
Useful links:
– Deloitte’s official website – provides more information about the report and other relevant research.
– Retail Week – a publication that covers the latest news and developments in the retail industry, including insights on consumer behavior and spending patterns.
