the deloitte consumer tracker a taste of spring to come · • sentiment improved on all measures...
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The Deloitte Consumer TrackerA taste of spring to come
Q1 2013
A Deloitte Insight Report
Contents
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 28 March and 2 April 2013.
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.
Executive summary 1
Consumer confidence 2
Household disposable income 3
Economic outlook 4
Spending behaviour in the last quarter 5
Consumer spending outlook 8
Contacts 10
2013 got off to an encouraging start with consumer confidence in disposable income improving for the fifth consecutive quarter.
The first quarter of 2013 has confirmed that the necessary conditions to reinvigorate consumer optimism are starting to emerge. In 2012 there were tentative signs of improvement: inflation fell which in turn helped to fuel a slight increase in discretionary spending. However, consumers remained cautious and continued to deleverage and save in anticipation of rising food and utility prices.
The latest Deloitte Consumer Tracker shows that in Q1 2013 confidence regarding disposable income is at its highest since the Tracker began in Q3 2011. There is less pressure on consumers’ ability to spend as market uncertainty subsides and key macroeconomic indicators such as housing prices and retail sales start pointing in the right direction.
Moreover, consumers have healthier balance sheets, having worked hard to pay down some of their debt since the beginning of the economic slowdown. They are also reluctant to take on more debt, making the uptrend in consumer expenditure since the first quarter of 2012 even more significant. Recent Bank of England figures show that secured lending has fallen over the last four years, and although this reflects a drop in the number of housing transactions, it is also a sign that consumers are changing their attitude to debt.
The consumer environment is also starting to improve. Although real earnings growth remains weak, and below inflation at just 0.3 per cent in 2012, it is better than the 1.7 per cent average annual contraction since 2008.
The question remains whether low debt interest and expectations of improving credit availability will be sufficient to give consumers enough confidence to continue to increase their spending in 2013. However with inflation forecast to rise in the next few months confidence could remain fragile.
The Deloitte Consumer TrackerQ1 2013
Key findings:
•Sentiment on disposable income is stronger than at any time since Q3 2011.
•UK household conditions remain stable in the first quarter of 2013.
•The consensus is for the recovery to gain traction as 2013 progresses.
•Despite a slight improvement compared to Q1 2012, spending remains subdued.
•Looking ahead consumers remain concerned about rising utility prices.
The Deloitte Consumer Tracker Q1 2013 1
•While household disposable income remains the main area of concern for consumers, it has continued to improve since the launch of the Deloitte Consumer Tracker in Q3 2011, showing a nine percentage point improvement compared to a year ago (from -40 per cent to -31 per cent).
•Sentiment improved on all measures compared to the previous quarter.
•Sentiment surrounding job security improved by three percentage points this quarter, the fastest rate since Q1 2012. Similarly debt levels at -9 per cent have nearly halved since the Tracker began in 2011.
Figure 1. UK consumer sentiment
Net % of UK consumers who said that their level of confidence has improved the last three months
Question: Thinking about the following aspects of your life … over the past three months would you say that your level of optimism/confidence in each area is better, the same or worse?
Yourchildren’seducation
and welfare
Yourlevel
of debt
Yourjob
security
Your jobopportunities/
careerprogression
Yourgeneral
health andwellbeing
Yourhouseholddisposable
income
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
-43% -3
9%-4
0% -36% -3
3%-3
3% -31%
-13% -1
0%-1
1%-1
3%-1
2%-1
5% -12%
-16% -1
3% -12%
-12% -10%
-13% -1
0%
-15%
-15%
-10%
-11%
-10%
-12% -9
%
-16% -1
3%-9
%-1
5%-1
0%-1
2%-9
% -6%
-1%
-3% -2%
-1%
-3% -2%
•Consumer confidence stabilised in Q1 2013 and is five points higher than at the same time last year, according to the GfK NOP consumer confidence index.
Figure 2. Consumer confidence index
-45
-40
-35
-30
-25
-20
-15
-10
-5
0
Mar13
Nov12
Jul12
Mar12
Nov11
Jul11
Mar11
Nov10
Jul10
Mar10
Nov09
Jul09
Mar09
Nov08
Jul08
Mar08
Nov07
Jul07
Mar07
Nov06
Jul06
Mar06
Source: GfK NOP
•After falling steadily in 2012, consumer price inflation has edged up over the last three months reaching 2.8 per cent in February and remaining at that rate in March. The Bank of England expects that in the second half of this year inflation could rise above 3 per cent due to increasing energy prices and higher import costs.
Figure 3. UK annual CPI inflation (%)
0
1
2
3
4
5
6
7
8
9
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
Source: Office for National Statistics
Consumer confidence
Sentiment on disposable income is stronger than at any time since Q3 2011.
2
Household disposable income
•While 14 per cent of UK households saw a reduction in income in the first quarter of 2013, the same proportion of households received a pay rise or bonus.
•People who received a pay rise or a bonus were twice as likely to be high income earners. In contrast those who saw a reduction of income were more likely to be from less affluent income groups.
•This polarisation is reflected in the good performances reported by retailers at each end of the retail market.
Figure 4. Changes in personal household circumstances in the past three months
% of UK consumers
Question: Thinking about your household circumstances in the past three months, which of the following apply to you or someone in your household?
Q1 2012Q1 2013
Adult with no income joinedthe household
A dependent child or family memberbecame financially independent/
recently became employed
Being laid off/made redundant/lost job
You or someone in your householdreceived a pay rise/bonus
Reduction/loss of some income(e.g. working reduced hours, etc.)
14%15%
14%15%
6%7%
4%2%
4%3%
•Real earnings growth remained weak and below inflation, at just 0.3 per cent in 2012. However it is better than the average 1.7 per cent annual contraction since 2008.
Figure 5. Average earnings growth and UK national inflation (%)
-6
-4
-2
0
2
4
6
8
20132012201120102009200820072006
UK annual CPI inflation (%) Average weekly earnings including bonuses (%)
Source: ONS
•In the final quarter of last year real spending was buoyed by rising prices in energy, food and drink, and clothing.
•Overall real consumer spending has grown in each of the past five quarters by a total of around 2 per cent.
Figure 6. Consumer expenditure and disposable income growth (%)
Consumer disposable income (%) Consumer spending (%)
-6
-4
-2
0
2
4
6
Q4‘12
Q2‘12
Q4‘11
Q2‘11
Q4‘10
Q2‘10
Q4‘09
Q2‘09
Q4‘08
Q2‘08
Q4‘07
Q2‘07
Q4‘06
Q2‘06
Q4‘05
Q2‘05
Q4‘04
Q2‘04
Q4‘03
Q2‘03
Q4‘02
Q2‘02
Q4‘01
Source: ONS
UK household conditions remain stable in the first quarter of 2013.
The Deloitte Consumer Tracker Q1 2013 3
Economic outlook
•There is still a risk that the economy could enter a triple dip recession, but the consensus is for the recovery to gain traction as 2013 progresses.
Figure 7. GDP growth (%)
-8
-6
-4
-2
0
2
4
6
2013201220112010200920082007
Forecasts
Quarter-on-quartergrowth
Year-on-yeargrowth
UK growth to seeweak recovery
Source: ONS, consensus forecasts from The Economist and Deloitte calculations
•Recent official figures indicated that the labour market’s recovery stalled for the first time in 16 months as employment fell.
Figure 8. UK private and public sector job growth (thousands)
Number of jobs added/lost each quarter, private sector vs public sector
PublicPrivate
-300
-200
-100
0
100
200
300
400
500
Q4‘12
Q3‘12
Q2‘12
Q1‘12
Q4‘11
Q3‘11
Q2‘11
Q1‘11
Q4‘10
Q3‘10
Q2‘10
Q1‘10
Q4‘09
Q3‘09
Q2‘09
Q1‘09
Q4‘08
Q3‘08
Q2‘08
Q1‘08
Q4‘07
Q3‘07
Q2‘07
Q1‘07
Source: ONS
•Encouragingly, the latest Deloitte CFO Survey shows a strikingly broad-based rise in confidence as British businesses look set to benefit from a less risky, and improving, global economic backdrop.
Figure 9. UK CFOs uncertainty
% of CFOs who rate the level of external financial and economic uncertainty facing their business as above normal, high or very high
72
77
82
87
92
97
Q1‘13
Q4‘12
Q3‘12
Q2‘12
Q1‘12
Q4‘11
Q3‘11
Q2‘11
Q1‘11
Q4‘10
Q3‘10
Sharp fall in uncertainty
Source: Deloitte CFO Survey
The consensus is for the recovery to gain traction as 2013 progresses.
4
Spending behaviour in the last quarter
•Consumers spent more on utilities in Q1 2013 as a result of increased energy prices, while spending in discretionary categories continued to ease compared to a year ago.
•Although clothing and footwear are showing an improved performance year on year, there was a deterioration in Q1 2013 following the coldest March on record.
•Spending on main household appliances increased in Q1 2013, a sign that consumers are starting to consider buying bigger ticket items.
Figure 10. Category spending in the past three months
Net % of UK consumers spending more by category over the past three months
Question: Thinking about all the expenses in your household, for each of the following, would you say you have spent more, less or the same in the past three months?
Q1 2012Q1 2013
Utility bills(e.g. water,electricity,gas and
other fuels)
Groceryshoppingfor foodand non-alcoholic
beverages
Housing(e.g. rent,mortgage,
maintenance)
Holidays(longbreak)
Majorhouseholdappliances
(e.g. washingmachine, fridge,cooker, vacuum
cleaner, etc.)
Alcoholicbeverages
andtobacco
Furnitureand
homeware
Restaurantsand hotels
(eatingout and
short break)
Clothingand
footwear
Going out(e.g. cinema,
theatre,concerts, etc.)
-26%-24% -23%
-17%-20%
-17% -17%-14% -14%13% -12%
-8%-11%
-8%
12% 11%
23%25%
43%48%
•After four consecutive months at 2.7 per cent, despite food inflation easing, higher energy prices and the inclusion of student fees pushed inflation to 2.8 per cent in February. Inflation remained stable in March at 2.8 per cent.
•According to consensus forecasts, inflation is likely to rise above 3 per cent in the second half of 2013 and fluctuate around this level into 2014.
Figure 11. UK CPI categories
March 2013 March 2012
-5 0 105
3.7
15 20
Food & non-alcoholic beverages
Alcoholic beverages, tobacco& narcotics
Clothing & footwear
Housing, water & fuels
Furn, HH equip & repair of the house
Health
Transport
Communication
Recreation & culture
Education
Hotels, cafes & restaurants
Miscellaneous goods & services
Total inflation 2.8
1.1
3.1
19.7
1.8
3.5
2.7
2.9
5.1
-0.6
4.8
3.3
2.8
4.5
-0.4
6.38
3.3
1.7
2.3
0.24.1
6.2
3.2
4.6
Source: ONS
Despite a slight improvement compared to Q1 2012, spending remains subdued.
The Deloitte Consumer Tracker Q1 2013 5
•Consumers are becoming more discerning, and defensive spending strategies saw a slight increase in the first quarter.
Figure 12. Reasons consumers spent less in the last three months
% of UK consumers spending less
Question: You just mentioned you spent less in the last three months, which of the following reasons apply to you?
Bargain huntingImpulse (less)Trading down
15%
20%
25%
30%
35%
40%
Q1 2013Q4 2012Q3 2012Q2 2012Q1 2012Q4 2011Q3 2011
•Growth in expansionary behaviours is being attributed to higher prices.
Figure 13. Reasons consumers spent more in the past three months
% of UK consumers spending more
Question: You just mentioned you spent more in the last three month, which of the following reasons apply to you?
Sale/Special offerTrading upPrice driven
15%
20%
25%
30%
35%
Q1 2013Q4 2012Q3 2012Q2 2012Q1 2012Q4 2011Q3 2011
•There was a notable improvement in retail sales in February, but poor weather so far this spring and fears of rising inflation may yet dampen sales towards mid-year.
Figure 14. Retail sales annual volume growth (%)
UK retail sales including automotive fuel (Volume) 3 months moving average
-6
-4
-2
0
2
4
6
8
Feb-
13
Sep-
12
Apr
-12
Nov
-11
Jun-
11
Jan-
11
Aug
-10
Mar
-10
Oct
-09
May
-09
Dec
-08
Jul-0
8
Feb-
08
Sep-
07
Apr
-07
Nov
-06
Jun-
06
Jan-
06
Aug
-05
Mar
-05
Oct
-04
May
-04
Dec
-03
Aug
-03
Mar
-03
Source: ONS
6
•Fewer consumers claim to be paying a mortgage compared to a year ago. This is in line with a recent Bank of England report showing a fall in secured lending, reflecting a drop in the number of housing transactions.
•As a result more people are renting compared with a year ago.
Figure 15. UK consumer monthly financial obligations
% UK consumers
Question: Thinking about your household financial outgoings every month, which of the following apply to you?
Q1 2012Q1 2013
Pay moneyinto a
savingsaccount
Repay thetotal balanceof my credit
card(s)
Pay amortgage(s)
Pay intoa pension
fund
Pay rentHave anoutstandingbalance on
credit card(s)
Makerepaymentson a loan(s)
26% 26%30% 31% 29% 31% 33% 32%
36% 34% 37% 38%
48% 46%
•Consumers continue to rebuild their finances with payments into savings accounts increasing.
•At the same time demand for credit cards rose compared to a year ago.
Figure 16. UK consumer attitudes to financial obligations in the last three months
Net % of UK consumers
Question: Now thinking about the financial obligations of your household over the last three months, what, if anything, did you do differently compared to four to six months ago; increase, reduce or do the same?
Q1 2012Q1 2013
Mortgage(s)repayments
Payment intoa pension
Credit card(s)/loan(s) repayments
Number of creditcard(s)/loan(s)
Pay money into asavings account
-10%
-8%
-6%
-1%
1%2% 2%
1%0%
-3%
•The savings ratio was at 7.2 per cent in 2012, its highest since 1997.
•As consumers focus on improving their finances, they spend less as shown by subdued consumer spending levels. However, this is also encouraging as they will be in a better to position to spend once their confidence returns.
Figure 17. Savings ratio (%)
-10123456789
Q4
2012
Q3
2012
Q2
2012
Q1
2012
Q4
2011
Q3
2011
Q2
2011
Q1
2011
Q4
2010
Q3
2010
Q2
2010
Q1
2010
Q4
2009
Q3
2009
Q2
2009
Q1
2009
Q4
2008
Q3
2008
Q2
2008
Q1
2008
Q4
2007
Q3
2007
Q2
2007
Q1
2007
Q4
2006
Q3
2006
Q2
2006
Q1
2006
Q4
2005
Source: ONS
•Our data reveals a polarised perception of credit conditions and attitudes to saving in the UK.
Figure 18. Consumer sentiment on access to credit and savings
I will be betteroff as a result of
the measuresannounced in the
recent GovernmentBudget
Compared to ayear ago, I amsaving more
money
Compared toa year ago,
credit cards arenow moreaffordable
Compared to ayear ago, loansare now more
affordable
Compared to ayear ago,
mortgages arenow moreaffordable
Compared to ayear ago, I am
paying-offmore debt
Compared to ayear ago, as a
householdwe are spending
less cash thanwe have available
Strongly agree/Agree Strongly disagree/Disagree Net balance
-33%-29%-24%-22%
-14%-3%-3%
12%18%
6%8%12%19%
25%
45%46%
30%30%27%22%
28%
The Deloitte Consumer Tracker Q1 2013 7
•Consumers remain concerned by rising utility bills following an unseasonably cold start to the spring.
•As a result, consumers expect utility prices to continue to rise in Q2 2013.
Figure 19. Category spending in the next three months
Net % of UK consumers spending more by category over the next three months
Question: And now thinking about all the expenses in your household in the next three months, for each of the following, would you say you will spend more, less or the same compared to four to six months ago?
Q1 2012Q1 2013
Uti
lity
bills
(e.g
. wat
er,
elec
tric
ity,
gas
and
oth
er f
uels
)
Gro
cery
sho
ppin
g fo
r fo
od a
ndno
n-al
coho
lic b
ever
ages
Hou
sing
(e.g
. ren
t,m
ortg
age,
mai
nten
ance
)
Hol
iday
s (lo
ng b
reak
)
Alc
ohol
ic b
ever
ages
and
toba
cco
Furn
itur
e an
d ho
mew
are
Clo
thin
g an
d fo
otw
ear
Maj
or h
ouse
hold
app
lianc
es
(e.g
. was
hing
mac
hine
, fri
dge,
cook
er, v
acuu
m c
lean
er, e
tc.)
Res
taur
ants
and
hot
els
(eat
ing
out
and
shor
t br
eak)
Goi
ng o
ut (e
.g. c
inem
a,th
eatr
e, c
once
rts,
etc
.)
-20%-18%
-16% -17%-19%
-16% -15% -16%-12%
-15%
-6% -7%
9%10% 11%12%
27%
21%
-18%-18%
•Consumers intend to continue to cut their number of credit cards and loans, and save more, confirming the consistent trend of 2012.
Figure 20. UK consumer attitudes to financial obligations in the next three months
Net % of UK consumers
Question: Again, thinking about the financial obligations of your household, which of the following, if any, do you intend to do in the next three months; increase, reduce or do the same?
Q1 2012Q1 2013
Pay money into asavings account
Payment intoa pension
Mortgage(s)repayments
Credit card(s)/loan(s) repayments
Number of creditcard(s)/loan(s)
-9%-8%
0%
-2%
1%
3% 3%3%4%
0%
Consumer spending outlook
Looking ahead consumers remain concerned about rising utility prices.
8
•Spending intentions on big ticket items remain stable compared to Q1 2012.
Figure 21. UK consumers planning major purchases in the next three months
% of UK consumers
Question: Below is a list of statements that may apply to you/your household … can you please indicate which of the proposed circumstances best applies to you/your household?
Q1 2012Q1 2013
3%3% 3%3%5%5% 5%5%
7%8%
9%9%
19%20%
3%2%
Paying fora longbreak
holiday
Adding anextension
to thehouse or
redecoratinga room
Buying anexpensive
electrical item(e.g. iPhone,
flat screen TV,computer/
laptop, etc.)
Buying amajor homeappliance
(e.g. washingmachine,
dishwasher,fridge, etc.)
Buyinga car
Upgrading:movinginto a
larger home
Downsizing:moving into
a smallerhome
Selling anexpensive
electrical item(e.g. iPhone,
flat screen TV,computer/laptop, etc.)
to save money
•One of the official measures of major purchases increased to -23, which is eight points higher than this time last year.
Figure 22. Major purchases intentions
-50
-40
-30
-20
-10
0
10
20
20132012201120102009200820072006
Source: GfK
The Deloitte Consumer Tracker Q1 2013 9
Authors Leadership team
Ben PerkinsHead of Research, Consumer Business020 7307 [email protected]
Nigel WixceyIndustry Leader, Consumer Business020 7303 [email protected]
Céline FenechResearch Manager, Consumer Business020 7303 [email protected]
Ian GeddesLead Partner, UK Retail020 7303 [email protected]
Graham PickettLead Partner, UK Travel, Hospitality and Leisure01293 [email protected]
Contacts
10
Notes
The Deloitte Consumer Tracker Q1 2013 11
Notes
12
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