Q4 2016
The Deloitte Consumer Tracker
Confidence remains undented
In a sign that consumer sentiment
has remained resilient following
the Brexit vote, the latest Deloitte
Consumer Tracker shows that
despite a drop of one percentage
point in overall consumer
confidence in Q4 2016 compared
to Q3, consumer confidence is now
higher than it was in Q4 2015.
Five out of the six measures which
make up the confidence index rose
in the last year. So far Brexit has
not dented consumers’ confidence
about the outlook for jobs with
sentiment about job opportunities
and career progression improving
and views on job security
unchanged.
Confidence among 18- to-34-year
olds is at its highest since the
Tracker began six years ago and is in
positive territory. This recovery has
been driven by growing confidence
about disposable income and debt,
and their sentiment regarding job
security, job opportunities and
career progression.
Consumers have not reined in
their spending either, with both
essential and discretionary
spending growing in Q4 2016.
Net spending on essentials rose
significantly (7 percentage points)
while net spending on discretionary
categories rose by two percentage
points compared to Q3 2016.
The growth in spending on
essentials was driven mainly by
increased spending on groceries
and utilities. With the grocery
sector still experiencing deflation
this might indicate genuine volume
growth in grocery retail. Indeed,
the supermarkets had a good
Christmas as a result. Not only
did the overall retail sector have a
bumper fourth quarter, the leisure
sector also continued its upward
trend with restaurant and hotel net
spending growth entering positive
territory for the first time since the
Tracker began.
However, these upbeat results
might not continue in 2017.
Consumer confidence in disposable
income fell marginally this quarter
compared to Q3 2016 (-12 to -14)
and is three percentage points
lower than it was in Q4 2015. This
could mark the beginning of a
squeeze on consumers’ ability to
spend. Moreover higher inflation,
driven by a weaker pound, is likely
to put pressure on consumer
spending growth.
Key indicators
Overall
consumer
confidence
(q/q)*
Confidence
in level of
job security
(q/q)*
Essentials
spending
(q/q)*
Previous
-5%
-6%
Latest
Previous
-4%
-4%
Latest
Previous
+5%
+12%
Latest
Discretionary
spending
(q/q)*
Previous
-2%
0%
Latest
ONS retail
sales value
growth
Dec-16 (y/y)
Previous
-1.1%
+7.1%
Latest
Previous
CPI inflation
Dec-16 (y/y)
+0.2%
+1.6%
Latest
* Net balances
The latest Deloitte Survey of UK
Chief Financial Officers shows
that in the wake of the Brexit
vote corporate perceptions of
uncertainty remain high and risk
appetite is depressed. CFOs enter
2017 with a focus on defensive
strategies including cost reduction
and building up cash as a matter
of priority. With the start of the
formal Brexit process by the end of
March and higher inflation expected
to impact purchasing power, UK
consumers will face headwinds
in 2017. The question remains
how much this will weigh on their
confidence and their spending.
Authors
Ben Perkins
Head of Research
Consumer & Industrial Products
020 7307 2207
[email protected]
Céline Fenech
Research Manager
Consumer & Industrial Products
020 7303 2064
[email protected]
Rebecca Thomson
Research Manager
Consumer & Industrial Products
020 7007 0891
[email protected]
1
The Deloitte Consumer Tracker Q4 2016 | Confidence remains undented
Consumer confidence
Consumer confidence is resilient following the Brexit vote
The latest Deloitte Consumer
Tracker shows that, despite a
drop of one percentage point in
overall consumer confidence in
Q4 2016 compared to Q3 2016,
consumer confidence – at minus six
percentage points – is now higher
than it was in Q4 2015.
Chart 1. Deloitte consumer confidence
Net % of consumers who said their level of confidence has improved in the past three months
0%
-5%
-10%
-15%
-20%
2015
2016
Q4 2012
Your general
health and
wellbeing
Q4 2013
Your
children’s
education
and welfare
-13%
-13%
-8%
-6%
-5%
-2%
-39%
-33%
-27%
-18%
-11%
-14%
Your level
of debt
-1%
-3%
-1%
Y
 our job
security
-10%
-15%
-12%
-16%
-17%
-16%
-13%
-12%
-10%
-4%
-4%
-3%
10%
0%
-10%
-20%
-30%
-40%
2%
0%
1%
Net % of consumers who said their level of confidence has improved in the past three months
Your
Your job
household opportunities/
disposable
career
income
progression
Q4 2014
Q4 2015
Q4 2016
Chart 3. Consumer confidence about job security, job opportunities
and career progression
Net % of consumers who said their level of confidence has improved in the past three months
0%
-2%
-4%
-6%
-8%
-10%
-12%
-14%
-16%
-18%
2012
Your job security
2
2014
Chart 2. UK consumer sentiment about personal situation
Q4 2011
So far Brexit has not dented
consumers’ confidence about
their outlook for jobs. Sentiment
about job opportunities and
career progression have improved
and views on job security are
unchanged.
2013
-15%
-12%
-6%
-7%
-6%
-4%
Five out of the six measures which
make up the confidence index rose
in the last year.
2012
2013
2014
2015
Your job opportunities/career progression
2016
The Deloitte Consumer Tracker Q4 2016 | Confidence remains undented
Consumer confidence
Confidence among 18- to 34-year olds’ is at its highest since the Tracker began
Confidence among the 18- to
34-year old group is at its highest
since the Tracker began and is in
positive territory.
Chart 4. Consumer confidence by age group
Net % of UK consumers who said their level of confidence has improved over the past
three months
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
18 to 34
This recovery has been driven by
their growing confidence about
disposable income and debt.
2012
2013
35 to 54
2014
2015
2016
55+
Chart 5. 18- to 34-year olds’ confidence in level of debt and
household disposable income
Net % of UK consumers who said their level of confidence has improved over the past
three months
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
2012
Your level of debt
Another contributing factor
is that 18- to 34-year olds’
sentiment about job security,
job opportunities and career
progression has improved for two
consecutive quarters.
2013
2014
2015
2016
Your household disposable income
Chart 6. 18- to 34-year olds’ confidence in job security,
job opportunities and career progression
Net % of UK consumers who said their level of confidence has improved over the past
three months
15%
10%
5%
0%
-5%
-10%
-15%
2012
Your job security
2013
2014
2015
2016
Your job opportunities/career progression
3
The Deloitte Consumer Tracker Q4 2016 | Confidence remains undented
Consumer spending
Both essential and discretionary spending were up in Q4 2016
Consumers have not reined in
their spending either, with both
essential and discretionary
spending growing in Q4 2016.
Net spending on essentials rose
significantly (7 percentage points)
while net spending on discretionary
categories rose by two percentage
points compared to Q3 2016.
Chart 7. Essentials vs discretionary spending
Net % UK consumers spending more by category
15%
10%
5%
0%
-5%
-10%
-15%
-20%
2012
Essentials
GfK measures of major purchases
rose by 7 points in December,
suggesting households’ appetite
for large purchases was still high.
Perhaps this is a sign of consumers
wanting to take advantage of the
large discounts available in the
run up to Christmas and of their
anticipation of higher retail prices
in 2017.
2013
2014
2015
2016
Discretionary
Chart 8. Major purchases
% change year-on-year
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
 2007
2008
2009
2010
2011
2012
2013
2014
2015
UK cons. svy. - GFK climate for major purchases NADJ
Source: GfK
Two out of the three measures
making up leisure spending
continued their upward trends this
quarter. With consumers going out
to celebrate in Q4 2016, restaurant
and hotel net spending growth
entered positive territory for the
first time since the Tracker began
in 2011.
Chart 9. Category spending in the last three months
Net % UK consumers spending more by category
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%
2012
2013
2014
2015
2016
Going out (e.g. cinema, theatre, concerts etc.)
Restaurants and hotels (eating out and short break)
4
Holidays (long break)
2016
The Deloitte Consumer Tracker Q4 2016 | Confidence remains undented
Consumer spending
Strong consumer spending in the grocery sector
Spending rose in most of the
discretionary categories. There was
also significant spending growth in
grocery and utilities.
Chart 10. Category spending in the last three months
Net % UK consumers spending more by category
Grocery shopping for food
& non-alcoholic beverages
U
 tility bills
Transport
Landline/mobile phone, internet
& cable/TV subscriptions
Alcoholic beverages & tobacco
Clothing & footwear
Restaurants & hotels
Electrical equipment
Holidays
Major household appliances
Furniture & homeware
Going out
-15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Q4 2013
The growth in spending on
essentials was driven mainly by
increased spending on groceries
and utilities. With the grocery
sector still experiencing deflation,
albeit at a slower rate, this
could indicate genuine volume
growth in grocery retail. Indeed,
the supermarkets had a good
Christmas.
Q4 2014
Q4 2015
Q4 2016
Chart 11. Inflation
% change year-on-year
Total inflation
Education
Transport
Hotels, cafes & restaurants
Alcoholic beverages, tobacco & narcotics
Health
Communication
Clothing & footwear
Miscellaneous goods & services
Recreation & culture
Furn, HH equip & repair of the house
Housing, water & fuels
Food & non-alcoholic beverages
15/11/15
0.2
1.6
4.3
3.7
-0.2
1.7
0.3
1.5
1.7
-0.3
-0.3
-0.2
-2.9
-1.1
1.2
1.0
1.1
0.9
0.6
4.8
2.8
2.4
2.4
2.7
0.4
0.3
15/11/16
Source: ONS
Overall the retail sector ended
the year on a positive note with
many retailers having a bumper
fourth quarter.
Chart 12. Retail sales (excl. fuel SA)
% change in volume and value year-on-year
8%
6%
4%
2%
0%
-2%
-4%
 2007
Value
2008
2009
2010
2011
2012
2013
2014
2015
2016
V
 olume
S
 ource: ONS
5
The Deloitte Consumer Tracker Q4 2016 | Confidence remains undented
Consumer finance
Era of low inflation and wage growth coming to an end
There are growing signs that the
weak pound is starting to push
up prices. With real wage growth
expected to slow next year
consumers might find it more
difficult to keep up with living costs.
Chart 13. % Growth in average wages vs CPI Inflation
% change year-on-year
8%
6%
4%
2%
0%
-2%
-4%
 2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
UK inflation (CPI)
A
 verage earnings including bonuses
S
 ource: Thomson Reuters DataStream
Unsecured consumer credit, which
includes credit cards, car loans and
second mortgages, grew by
10.8 per cent in the year to
November, its fastest rate in
more than 11 years.
Chart 14. Consumer credit
Secured and unsecured lending to individuals (% change year-on-year)
12%
10%
8%
6%
4%
2%
0%
-2%
-4%

2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
UK consumer credit-net unsecured lending to individuals (%YOY)
U
 K personal borrowing: dwellings – net lending (%YOY) SADJ
Source: Thomson Reuters DataStream
The unemployment rate has
continued to decline and stood
at 4.8 per cent in the three
months to October 2016, putting
it at an 11-year low. However, the
Bank of England forecasts that
unemployment will rise gradually
to about 5.4 per cent this year as
a result of slower growth after the
Brexit vote.
Chart 15. Unemployment rate
% change year-on-year
10%
8%
6%
4%
2007

2008
2009
2010
2011
2012
2013
UK LFS: unemployment rate, all, aged 16 and over SADJ
Source: Thomson Reuters DataStream
6
2014
2015
2016
The Deloitte Consumer Tracker Q4 2016 | Confidence remains undented
Outlook
Upbeat results might not continue in 2017
Consumers in our survey expect
to spend more on essentials in
the next three months but less on
discretionary goods.
Chart 16. Category spending over the next three months
Net % UK consumers spending more by category
10%
5%
0%
-5%
-10%
-15%
-20%
2012
Essentials
Consumer confidence in disposable
income fell marginally this quarter
compared to Q3 2016 (-12 to -14)
and is three percentage points
lower than it was in Q4 2015.
This could mark the beginning of
a squeeze on consumers’ ability
to spend.
2013
Small-ticket items
2014
2015
2016
Big-ticket items
Chart 17. Consumer confidence in level of disposable income
Net % of UK consumers who said their level of confidence has improved over the past
three months
-10%
-20%
-30%
-40%
-50%
With the start of the formal Brexit
process in March and higher
inflation expected to impact
purchasing power, UK consumers
will face headwinds in 2017. The
question remains how much this
will weigh on their confidence and
their spending.
2012
2013
2014
2015
2016
Chart 18. Consumer indicator projections
% change year-on-year
Change
Inflation
Household
consumption
Average weekly
earnings
Q4 2017 (Aug 2016)
Q4 2017 (Nov 2016)
2%
2.7%
2016
2017
2.75%
1.25%
2017 (Aug 2016)
2017 (Nov 2016)
3%
2.75%
Source: Bank of England
7
Contacts
Nigel Wixcey
Industry Leader, Consumer
& Industrial Products
020 7303 5007
[email protected]
Ian Geddes
Lead Partner, UK Retail
020 7303 6519
[email protected]
Graham Pickett
Lead Partner, UK Travel,
Hospitality and Leisure
01293 761232
[email protected]
About this research
The 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
31 December 2016 and 2 January 2017.
A note on the methodology
Some 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.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private
company limited by guarantee, and its network of member firms, each of which is a legally
separate and independent entity. Please see www.deloitte.co.uk/about for a detailed
description of the legal structure of DTTL and its member firms.
Deloitte LLP is the United Kingdom member firm of DTTL.
This publication has been written in general terms and therefore cannot be relied on to
cover specific situations; application of the principles set out will depend upon the particular
circumstances involved and we recommend that you obtain professional advice before acting
or refraining from acting on any of the contents of this publication. Deloitte LLP would be
pleased to advise readers on how to apply the principles set out in this publication to their
specific circumstances. Deloitte LLP accepts no duty of care or liability for any loss occasioned
to any person acting or refraining from action as a result of any material in this publication.
© 2017 Deloitte LLP. All rights reserved.
Deloitte LLP is a limited liability partnership registered in England and Wales with registered
number OC303675 and its registered office at 2 New Street Square, London EC4A 3BZ,
United Kingdom. Tel: +44 (0) 20 7936 3000 Fax: +44 (0) 20 7583 1198.
Designed and produced by The Creative Studio at Deloitte, London. J10515