a worried nation the deloitte consumer tracker · 2020-05-12 · the deloitte consumer tracker q4...

A worried nationThe Deloitte Consumer TrackerQ4 2018

ContentsPrevious

Latest

-7%-9%

Overall consumer confidence (q/q)*

Previous

Latest

-19%-21%

Confidence inlevels of disposable income (q/q)*

Previous

Latest

-6%-6%

Confidence in levels of debt (q/q)*

Previous

Latest

-5%-7%

Confidence in job security (q/q)*

Previous

Latest

1%-3%

Confidence in job opportunities (q/q)*

Consumer confidence

Deloitte consumer confidence index 04

Individual measures of confidence: 05

Household disposable income 06

Levels of debt 07

Job security 08

Job opportunities and career progression 09

General health and wellbeing 10

Children’s education and welfare 11

The wider economy and consumer confidence

Falling inflation and rising wages, the bright 13 spots of the economy

Unemployment close to its lowest level since 14 the 1970s

Consumer appetite for unsecured borrowing 15 is waning

Consumer spending

Essentials vs discretionary spending 17

Inflation by category 18

Consumer spending by category 19

Retail sales 20

Car registrations 22

Essential vs discretionary spending outlook 23

Consumer spending by category outlook 24

The last word 25

The last, last word 26

Authors 27

*Net balances

Q4 2018 at a glance

Consumer confidence

03

The Deloitte Consumer Tracker Q4 2018

Deloitte consumer confidence index*

Net % of consumers who said their level of confidence has improved in the past three months

-18

-16

-14

-12

-10

-8

-6

-4

-2

0

Source: The Deloitte Consumer Tracker

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

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2016

Q1

2017

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2017

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2017

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2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Confidence falls for the second consecutive quarterIn Q4 2018 Deloitte’s consumer confidence index fell 2 percentage points to -9% from -7% in Q3 2018. Confidence is at its lowest level since Q2 2017.

*�The�Deloitte�consumer�confidence�index�is�an�average�of�the�net�%�of�consumers�who�said�their�level�of�confidence�improved�in�the�past�three�months�for�six�individual�measures�of�confidence�(see�next�slide).

04


Our overall confidence index is based on six individual measures of confidence

Individual measures of consumer confidence

Levels of debt

Job opportunities/career progression

General health and wellbeing

Job security

Children’s education and welfare

Current Q4 2018net balances*

% point change quarter-on-quarter

Q3 2018

% point change year-on-year

Q4 2017

Household disposable income

0 -3

-2 -4

-2 0

-4 -2

-1 -2

-2 -4-21%

-6%

-7%

-3%

-17%

-1%

Source: The Deloitte Consumer Tracker*for a definition of 'net balances' please see 'a note on the methodology' on page 27

05


Consumer confidence about their household levels of disposable income

Sentiment in levels of disposable income fell this quarter Confidence in levels of disposable income fell by 2 percentage points. The fall in inflation since August and real wage growth have not yet permeated through to consumers.

Net % of consumers who said that their confidence in their levels of household disposable income has improved in the past three months

-44

-40

-36

-32

-28

-24

-20

-16

-12

-8

-4

0


Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

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2013

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2016

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2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

06


Consumer confidence about their levels of debt

Net % of consumers who said that their confidence in their levels of debt has improved in the past three months

-16

-14

-12

-10

-8

-6

-4

-2

0


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

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2016

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Q1

2017

Q2

2017

Q3

2017

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2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Sentiment surrounding levels of debt remained stableThere was no change in consumer sentiment about levels of debt this quarter after it fell by 5 percentage points the previous quarter, the greatest drop since Q2 2012. Sentiment about levels of debt remaining flat coincided with household borrowing easing, a sign that consumers do not feel now is a good time to take on new financial commitments.

07


Consumer confidence about job security

Optimism surrounding job security droppedIn light of heightened political and economical uncertainty, the lowest unemployment rate since the mid-1970s was not enough to boost confidence about the job market.Consumer sentiment about job security dropped by 2 percentage points, and is now at its lowest level since Q2 2016.

Net % of consumers who said that their confidence in their job security has improved in the past three months

-16

-14

-12

-10

-8

-6

-4

-2

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

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2014

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2014

Q1

2015

Q2

2015

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2015

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2015

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2016

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2016

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2016

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2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

08


Consumer confidence about job opportunities

Consumer confidence about job opportunities falls Sentiment surrounding job opportunities fell by a further 2 percentage points this quarter, back to levels last seen a year ago.

Net % of consumers who said that their confidence in their job opportunities and their career progression has improved in the past three months

-16

-14

-12

-10

-8

-6

-4

-2

0

2


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

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

09


Consumer confidence about their general health and wellbeing

Consumers were less confident about their general health and wellbeing this quarter Consumer confidence in their general health and wellbeing dropped by 4 percentage points quarter-on-quarter from -13% to -17% in Q4 2018.

Net % of consumers who said that their confidence in their general wealth and wellbeing has improved in the past three months

-20

-18

-16

-14

-12

-10

-8

-6

-4

-2

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

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2014

Q1

2015

Q2

2015

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2015

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2015

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2016

Q2

2016

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2016

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2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

10


Consumer confidence about their children’s education and welfare

Sentiment about children’s education and welfare falls this quarter Consumer confidence in their children’s education and welfare fell by 1 percentage point and enters into negative territory again.

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4


Net % of consumers who said that their confidence in their children s education and welfare has improved in the past three months

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

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2014

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2015

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2015

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2015

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2016

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2016

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2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

11

The wider economy and its impact on consumer confidence

12


Falling inflation and rising wages, the bright spots of the economy

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

CPI Inflation vs average earnings (inc. bonuses) (year-on-year % growth)

Source: Thomson Reuters

CPI inflation Average earnings including bonuses

Dec

200

8M

ay 2

009

Oct

200

9M

ar 2

010

Aug

2010

Jan

2011

Jun

2011

Nov

201

1Ap

r 20

12Se

p 20

12Fe

b 20

13Ju

l 201

3D

ec 2

013

May

201

4O

ct 2

014

Mar

201

5Au

g 20

15Ja

n 20

16Ju

n 20

16N

ov 2

016

Apr

2017

Sep

2017

Feb

2018

Jul 2

018

Dec

201

8

Among the bright spots for the economy are falling levels of inflation and rising average wages In particular, with wage growth having risen to a decade high in November and inflation falling back closer to the two per cent target set by the Bank of England in December, consumers should be receiving decent rises in their real wages.

13


Unemployment close to its lowest level since the 1970s

0

1

2

3

4

5

6

7

8

9

10

UK unemployment rate (all aged 16 and over)


Sep

2008

Jan

2009

May

200

9Se

p 20

09Ja

n 20

10M

ay 2

010

Sep

2010

Jan

2011

May

201

1Se

p 20

11Ja

n 20

12M

ay 2

012

Sep

2012

Jan

2013

May

201

3Se

p 20

13Ja

n 20

14M

ay 2

014

Sep

2014

Jan

2015

May

201

5Se

p 20

15Ja

n 20

16M

ay 2

016

Sep

2016

Jan

2017

May

201

7Se

p 20

17Ja

n 20

18M

ay 2

018

Sep

2018

Low unemployment should mean faster wage risesWith the unemployment rate at a 43-year low (4 per cent in the three months to November), rising skills shortages seem likely to exert upward pressure on wages.

14


Consumer appetite for unsecured borrowing is waning

-3

0

3

6

9

12

Unsecured lending to individuals


UK consumer credit – Net unsecured lending to individuals (% year-on-year)

Nov

200

8M

ar 2

009

Jul 2

009

Nov

200

9M

ar 2

010

Jul 2

010

Nov

201

0M

ar 2

011

Jul 2

011

Nov

201

1M

ar 2

012

Jul 2

012

Nov

201

2M

ar 2

013

Jul 2

013

Nov

201

3M

ar 2

014

Jul 2

014

Nov

201

4M

ar 2

015

Jul 2

015

Nov

201

5M

ar 2

016

Jul 2

016

Nov

201

6M

ar 2

017

Jul 2

017

Nov

201

7M

ar 2

018

Jul 2

018

Nov

201

8

However UK consumer credit growth cools to lowest rate in 3 years Although UK household debt remains historically high, the annual rate of consumer credit growth fell to its slowest rate since March 2015 in November a sign of the slowdown in consumer spending since the summer. UK consumer borrowing helped to sustain the economy after the Brexit vote as savings ratios fell to historic lows, however the appetite for further spending could diminish as households rebuild their savings and house price growth slows.

15

Consumer spending

16


Essentials vs discretionary spending

-20

-16

-12

-8

-4

0

4

8

12

16

20

Net % UK consumers spending more by category in the last three months


Essential Discretionary

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

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2014

Q1

2015

Q2

2015

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2015

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2015

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2016

Q2

2016

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2016

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2016

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2017

Q2

2017

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2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

The fall in confidence in personal finances resulted in more muted spending growth than expected in what is known as the golden quarterOverall, net spending on essentials and discretionary categories were up by 3 percentage points (to 13 per cent from 10 per cent) and 4 percentage points (to 0 per cent from -4) respectively compared to the previous quarter.

17


Inflation closer to the Bank of England 2% target

CPI inflation by category (% change y/y)

-1 0 1 2 3 4 5 6

Clothing and footwear

Miscellaneous goods and services

Furniture, HH equipmentand repair of the house

Food and non-alcoholic beverages

Health

Recreation and culture

Housing, water and fuels

Communication

Hotels, cafes and restaurants

Education

Transport

Alcoholic beverages, tobaccoand narcotics

Total inflation

0.7%


December 2017 December 2018

3.0%2.1%

5.6%4.1%

3.8%3.4%

2.8%3.1%

3.1%3.1%

1.0%2.9%

2.3%2.8%

2.8%2.7%

3.2%2.3%

3.9%

3.2%0.4%

0.8%0.1%

3.1%-0.9%

CPI inflation falls to 2.1 per cent in DecemberThe drop was largely due to the fall in the price of transport related items, such as fuel prices and airfares.Compared to a year ago there was quite a significant fall in the price of clothing, food and drinks and furniture and homeware.

18


Consumer spending in the last three months

Net % UK consumers spending more by category over the last three months

-20 -15 -10 -5 0 5 10 15 20 25 30 35Furniture and homeware

Going outElectrical equipment

Major household appliances Education

Restaurants and hotelsHolidays

Clothing and footwearPensions and insurance

Alcoholic beverages and tobaccoPhone & Internet

HousingHealth

TransportUtility bills

Grocery shopping

Less spending

Mor

e sp

endi

ng


Q3 2018 Q4 2018

Consumers prioritised their spending differently and directed more of their cash on experiences In the lead up to Christmas, there was the expected seasonal growth in spending for the grocery, clothing and alcohol categories. The more surprising results came from the leisure sector. Net spending in restaurants was up by 6 percentage points while going out was up by 11 percentage points compared with the previous quarter.

19


Retail sales (excl. fuel SA)


% change in volume and value year-on-year

Volume Value

Aug

2008

Dec

200

8

Apr

2009

Aug

2009

Dec

200

9

Apr

2010

Aug

2010

Dec

201

0

Apr

2011

Aug

2011

Dec

201

1

Apr

2012

Aug

2012

Dec

201

2

Apr

2013

Aug

2013

Dec

201

3

Apr

2014

Aug

2014

Dec

201

4

Apr

2015

Aug

2015

Dec

201

5

Apr

2016

Aug

2016

Dec

201

6

Apr

2017

Aug

2017

Dec

201

7

Apr

2018

Aug

2018

Dec

201

8

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

20


Retail sales (excl. fuel SA) (continued)

Sales growth defies expectationsOur Tracker results are aligned to the slowing growth in official retail sales during the last quarter of 2018. According to the Office for National Statistics, UK retail spending in value in Q4 2018 was down slightly (-0.3 per cent) compared with the previous three-month period, but was up 3.5 per cent compared to the same period in 2017. More restrained retail sales point to the structural challenges around cost and competition in the sector. However, looking at individual retailers, there is some clear divergence of performance across categories and retail business models. There was slower growth in non-food sales, particularly in clothing sales where heavy and extended discounting failed to attract buyers. By contrast, online retailers continued to report strong growth, outperforming the high street. Online spending now accounts for 20 per cent of all retail spending, a new record.

Q4 2018:

Retail�sales�(excl.�fuel) +3.5%�y-o-yOnline sales +13.3%�y-o-yStore�sales�(excl.�fuel) +0.9%�y-o-y

59%�of�the�growth�came�from�online�(£8.7bn�out�of�£14.6bn).

21


UK car registrations

-40

-30

-20

-10

0

10

20

30

40

50

60

Source: The Society of Motor Manufacturers and Traders (SMMT)

UK car registrations % change year-on-year

Dec

200

8M

ay 2

009

Oct

200

9M

ar 2

010

Aug

2010

Jan

2011

Jun

2011

Nov

201

1Ap

r 20

12Se

p 20

12Fe

b 20

13Ju

l 201

3D

ec 2

013

May

201

4O

ct 2

014

Mar

201

5Au

g 20

15Ja

n 20

16Ju

n 20

16N

ov 2

016

Apr

2017

Sep

2017

Feb

2018

Jul 2

018

Dec

201

8

Sharp decline in car registrations as consumers shy away from major purchases The UK new car registration declined at the fastest rate since the global economic crisis by 6.8 per cent in 2018, according to the Society of Motor Manufacturers and Traders (SMMT).

A 5.5 per cent decline in December capped a turbulent year of regulatory upheaval and continued anti-diesel policies, adding to the ongoing decline in consumer and business confidence.

22


Outlook for consumer spending – essential vs discretionary spending

-20

-15

-10

-5

0

5

10

Net % of UK consumers spending more by category over the next three months


Essential Discretionary

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

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Consumer spending expected to slow in Q1 2019The outlook for consumer spending on both discretionary and essential categories suggests that consumers intend to rein in their spending over the next three months.

23


Outlook for consumer spending – by category

Spending will slow across nearly all categoriesConsumers enter 2019 in a cautious mood. In Q1 2019, consumers are expecting to spend less all categories but on holidays and furniture.

Net % UK consumers spending more by category over the next three months

-25 -20 -15 -10 -5 0 5 10 15 20 25Alcoholic beverages and tobacco

Clothing and footwear

Going out

Restaurants and hotels

Electrical equipment

Major household appliances

Furniture and homewareEducation

Landline/mobile phone, internetand cable/TV subscriptions

Pensions and insuranceHolidays (long break)

Health

Grocery shopping for food andnon-alcoholic beverages

TransportHousing

Utility bills

Less spending

Mor

e sp

endi

ng


Q3 2018 Q4 2018

24


The last word

UK consumer confidence continued to decline in Q4 2018, according to data from the Deloitte Consumer Tracker. Our consumer confidence index fell 2 percentage points to -9 from -7 in Q3 2018. Confidence has now fallen for the second consecutive quarter, a sign that consumers have become more cautious.

Takeaway 1This quarter’s fall in overall confidence compared to Q3 2018 was due to a decline in sentiment in five of our six confidence measures.Increasing political uncertainty and negative business reports have had an impact on consumers’ sentiment about their personal finances and job security. The fall in these measures contrasts with macroeconomic indicators that paint a stronger picture for the consumer. In particular, with wage growth having risen to a decade high in October and inflation falling back closer to its two per cent target in December, consumers should be receiving decent rises in their real wages.

Takeaway 2The fall in confidence resulted in more muted spending growth than expected in the golden quarter. Overall, net spending on essentials and discretionary categories were up by 3 and 4 percentage points respectively compared to Q3 2018.

In the lead up to Christmas, there was the expected seasonal growth in spending for the grocery, clothing and alcohol categories. However, on a year on year basis, spending fell not only on essentials but also on big-ticket items such as electrical goods and furniture. Grocery spending also slowed compared to Q4 2017, a result of falling inflation and, people switching to cheaper stores in their search for better value.

Takeaway 3The more surprising spending results came from the leisure sector.Net spending in restaurants was up by 6 percentage points while going out was up by 11 percentage points compared with Q3 0218. In a sign that this was not simply due to the seasonal effect, net spending in leisure categories also increased significantly year on year by an average of 4 percentage points. We believe that the growth in leisure spending was driven by more than just lower transport and food prices. Consumers prioritised their spending differently and directed more of their cash on experiences while consciously reducing their spending on big-ticket product categories.

Takeaway 4Consumers enter 2019 in a cautious mood.Prospects for consumer confidence over the next year will be closely linked to how, or indeed if, the UK leaves the EU.

With the UK economic fundamentals remaining solid, and unemployment at historic lows, a reduction in Brexit uncertainties could deliver a rebound in consumer confidence and spending.

25


Ian Stewart Chief Economist, Deloitte

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.

Ben Perkins Head of Consumer & Industrial Products Research

The findings this quarter reveal that consumers are getting ahead of the positive macro-economic data as they anticipate bad times ahead.

The fall in confidence resulted in more muted spending growth than expected during the golden quarter.

Consumers enter 2019 in a cautious mood. As a result we expect spending to continue to slow especially in the big-ticket item categories.

Simon OatenTransport, Hospitality and Leisure lead partner

The growth in leisure spending this quarter contrasts with the rest of the consumer landscape.

Recent growth in spending on restaurants, leisure facilities and travel was driven by more than just falling prices. Consumers are consciously choosing to spend on experiences over products in an era of the ‘lifestyle experience’.

The last, last word

Ian Geddes Retail lead partner

2018 was a tough year for UK retail. Many retailers found themselves in an uncomfortable position as margins were squeezed between weakening demand and rising costs. For some retailers it was a fight for survival, others have already closed their door for the last time. In fact, in the last year we have seen an acceleration in the number of store closures as under-pressure retailers tried to restructure their business.

The industry is going through a significant transformation from a predominantly store-based past to a digital future. With more innovation than ever before, new channels appearing and opportunities to grow both at home and abroad, retail is not dying, it is being re-invented.

26


Authors

Ben Perkins Contributor Head�of�Consumer� and�Industrial�Products�Research

[email protected]+44 20 7007 2207

Celine Fenech Author Manager,�Consumer�and�Industrial�Products�Research�

[email protected] +44 20 7303 2064

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.

27

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©�2019�Deloitte�LLP.�All�rights�reserved.

Designed�and�produced�by�368�at�Deloitte,�London.�J17299

The�Deloitte�Consumer�Tracker�is�based�on�a�consumer�survey�carried�out�by�independent�market�research�agency,�YouGov,�on�Deloitte’s�behalf.

This�survey�was�conducted�online�with�a�nationally�representative�sample�of�more�than�3,000�UK�adults �aged�18+�between�4�and�7�January�2019.

a worried nation the deloitte consumer tracker · 2020-05-12 · the deloitte consumer tracker q4...

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