Q1 2017
The Deloitte Consumer Tracker
Confidence softens
The latest Deloitte Consumer
Tracker shows a fall in consumer
confidence in the first quarter
of 2017, a sign of the rising
cost pressures emerging in the
consumer economy. Despite
a quarter-on-quarter drop of
one percentage point in overall
consumer confidence in Q1 at
-7 it remains in line with the
three-year average.
This softening in overall consumer
confidence is driven by a quarterly
drop across four of the six
measures which make up the
confidence index. Confidence in
disposable income in particular
fell by three percentage points this
quarter to reach its lowest level in
over two years.
Since the EU referendum,
consumer spending has been
holding up well, but with inflation
rising and nominal wage growth
starting to slow, consumers are
beginning to feel a squeeze on
their disposable income. Food
prices in March were up for the
second consecutive month,
while transport costs increased by
4.7%. Overall, the rate of inflation
stood at 2.3%, above the Bank of
England’s 2% target, for the first
time since 2013.
There are already some signs that
these pressures are contributing
to a slowdown in spending growth.
While spending on essentials
remained unchanged this quarter,
discretionary spending fell by four
points (0 to -4) compared to Q4 2016.
When considering how confidence
fared among the different
demographic groups, it is the
lower socioeconomic groups that
saw the most significant drop
in overall confidence. The C2
socioeconomic group in particular
has been disproportionately
affected by inflationary pressures.
They reported an 11 percentage
point drop in their level of
disposable income compared to
Q4 2016 (-8 to -19).
With less disposable income
consumers will have to consider
whether to trade down, buy less
or borrow more. The latter may
not be that feasible as consumers
have already been tapping into
their savings. The latest data on
the household savings ratio for
Q4 2016 shows it is at its lowest
level in over 50 years. However,
with interest rates remaining low,
debt is relatively cheap to manage.
Key indicators
Overall
consumer
confidence
(q/q)*
Confidence
in level of
disposable
income (q/q)*
Essentials
spending
(q/q)*
Previous
-6%
-7%
Latest
Previous
-14%
-17%
Latest
Previous
+12%
+12%
Latest
Discretionary
spending
(q/q)*
Previous
0%
-4%
Latest
ONS retail
sales value
growth
Feb-17 (y/y)
Previous
+1.7%
+4.7%
Latest
Previous
CPI inflation
Mar-17 (y/y)
+0.5%
+2.3%
Latest
* Net balances
Our survey shows that consumers
remain broadly confident, and
record levels of employment
should ensure a modest slowdown
in consumer spending rather than
a collapse during 2017. However, it
is clear that consumer businesses
can only absorb so much of the
cost pressures caused by rising
inflation: if inflation continues
on its current trajectory, it is
inevitable that consumers will
see a sharp rise in prices.
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]
1
The Deloitte Consumer Tracker Q1 2017 | Confidence softens
Consumer confidence
Confidence falls
Chart 1. Deloitte consumer confidence
Net % of UK consumers who said their level of confidence has improved in the past three months
0%
-5%
-10%
-15%
-20%
Chart 2. Consumer sentiment about personal situation
Your
Your
household general health
disposable and wellbeing
income
Q1 2012
Since the EU referendum,
consumer spending has been
holding up well, but with inflation
rising and nominal wage growth
starting to slow, consumers are
beginning to feel a squeeze on their
disposable income.
Q1 2013
Your job
security
Q1 2014
-1%
-2%
-3%
-2%
-9%
-9%
-3%
-2%
-1%
-2%
-12%
-10%
-5%
-1%
-5%
-4%
-10%
-10%
-5%
-4%
-7%
-5%
10%
0%
-10%
-20%
-30%
-40%
1%
1%
Net % of UK consumers who said their level of confidence has improved in the past three months
-11%
-12%
-8%
-13%
-19%
-13%
This softening in overall consumer
confidence is driven by a quarterly
drop across four of the six
measures which make up the
confidence index. Confidence in
disposable income in particular
fell by three percentage points this
quarter to reach its lowest level in
over two years.
2012
2013
2014
2015
2016
2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
-40%
-31%
-20%
-13%
-14%
-17%
The latest Deloitte Consumer
Tracker shows a fall in consumer
confidence in the first quarter of
2017, a sign of rising cost pressures
emerging in the consumer
economy. Despite a quarter-onquarter drop of one percentage
point in overall consumer
confidence in Q1, at -7 it remains in
line with the three-year average.
Your job
Your level Your children’s
opportunities/ of debt
education
career progression
and welfare
Q1 2015
Q1 2016
Q1 2017
Chart 3. Consumer confidence about level of disposable income
Net % of UK consumers who said their level of confidence has improved in the past
three months
-10%
-15%
-20%
-25%
-30%
-35%
-40%
2
2012
2013
2014
2015
2016
2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
The Deloitte Consumer Tracker Q1 2017 | Confidence softens
Consumer confidence
Inflationary pressures hit the lower socioeconomic groups’ confidence
When considering how confidence
fared among the different
demographic groups, it is the lower
socioeconomic groups that saw
the most significant drop in overall
confidence.
Chart 4. Consumer confidence by socioeconomic group
Net % of UK consumers who said their level of confidence has improved over the past
three months
0%
-5%
-10%
-15%
-20%
-25%
AB
The C2 socioeconomic
group in particular has been
disproportionately affected by
inflationary pressures. They
reported an 11 percentage point
drop in their level of disposable
income compared to Q4 2016
(-8 to -19).
2012
2013
2014
2015
2016
2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
C1
C2
DE
Chart 5. Consumer confidence about level of disposable income by
socioeconomic group
Net % of UK consumers who said their level of confidence has improved over the past
three months
0%
-10%
-20%
-30%
-40%
-50%
-60%
AB
Another contributing factor to the
drop in consumer confidence is
that sentiment about debt level
has deteriorated over the last
quarter among the two lower
socioeconomic groups (C2DE).
2012
2013
2014
2015
2016
2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
C1
C2
DE
Chart 6. Confidence in level of debt by socioeconomic 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%
AB
2012
2013
2014
2015
2016
2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
C1
C2
DE
3
The Deloitte Consumer Tracker Q1 2017 | Confidence softens
Consumer spending
Holding their breath?
There are some signs of a
slowdown in spending on a
quarterly basis. After a significant
jump in essential spending in Q4
2016, spending on essentials was
unchanged this quarter. Meanwhile
discretionary spending returned
to negative territory falling by
four points (0 to -4) this quarter
compared to Q4 2016.
Chart 7. Essentials vs discretionary spending
Net % UK consumers spending more by category
15%
10%
5%
0%
-5%
-10%
-15%
-20%
2012
2013
2014
2015
2016
2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Essentials
With less disposable income
consumers will have to consider
whether to trade down, buy less
or borrow more. Already GfK’s
monthly Consumer Confidence
Index shows that British consumers
are moving away from making
major purchases, with the Index
five points lower than in March
last year.
Discretionary
Chart 8. Major purchases
% change year-on-year
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%
2012
2013
2014
2015
2016
2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Source: GfK
Despite a seasonal dip consumer
spending on retail and leisure
remains in line with the recent
trend. A sign that if consumers
carry on spending, fears of a
slowdown following the triggering
of Article 50 might be unfounded.
Chart 9. Category spending in the last three months
Net % UK consumers spending more by category
10%
5%
0%
-5%
-10%
-15%
-20%
2012
2013
2014
2015
2016
2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Retail spending
4
Leisure spending
The Deloitte Consumer Tracker Q1 2017 | Confidence softens
Consumer spending
Keep calm and carry on spending
Year-on-year there was significant
spending growth in all the essential
categories including transport,
grocery and utilities. Spending
in discretionary categories also
continued to grow compared to a
year ago, including in categories
such as clothing, going out or
electrical equipment.
Chart 10. Category spending in the last three months
Net % UK consumers spending more by category
Utility bills
Grocery shopping for food
and non-alcoholic beverages
Transport
Housing
Holidays
Major household appliances
Electrical equipment
Restaurants and hotels
Furniture and homeware
Clothing and footwear
Alcoholic beverages and tobacco
Going out
-20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35%
Q1 2014
Food prices in March were up for
the second consecutive month,
while transport costs increased
by 4.7%. Overall inflation stood
at 2.3%, above the Bank of
England’s 2% target, for the first
time since 2013.
Q1 2015
Q1 2016
Q1 2017
Chart 11. Inflation
% change year-on-year
Total inflation
Alcoholic beverages, tobacco & narcotics
Transport
Education
Hotels, cafes & restaurants
Communication
Health
Miscellaneous goods & services
Recreation & culture
Food & non-alcoholic beverages
Furn, HH equip & repair of the house
Housing, water & fuels
Clothing & footwear
15/03/16
15/03/17
2.3
0.5
4.9
1.0
4.7
-0.1
4.3
2.1
1.4
1.0
-0.2
-2.7
0.6
0.4
-3% -2% -1%
0%
4.8
2.8
2.2
1.8
1.8
1.6
1.2
1.1
1.1
0.9
1%
2.9
1.4
2%
3%
4%
5%
Source: The Office for National Statistics (ONS)
Despite inflationary pressures
mounting, retailers received a
respite from two months of falling
retail sales in February. Retail sales
volumes were up by 4.1% while
value was up by 5.2% compared
to a year ago. However, the
underlying three-month numbers
– considered a better guide to the
underlying trend than the monthly
figure alone – show lower sales
than in the quarter ending
in November.
Chart 12. Retail sales (excl. fuel SA)
% change in volume and value year-on-year
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
2007 2008
Value
2009
2010
2011
2012
2013
2014
2015
2016
2017
V
 olume
S
 ource: ONS
5
The Deloitte Consumer Tracker Q1 2017 | Confidence softens
Consumer finance
Inflation might start to bite soon
There are growing signs that the
spike in inflation will soon start to
bite. Inflation and wage growth are
now running at the same 2.3% rate,
and given that inflation is expected
to be above 3% later this year, real
incomes are set to fall.
Chart 13. % Growth in average wages vs CPI Inflation
% change year-on-year
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
2007 2008
2009
2010
2011
A
 verage earnings including bonuses
2012
2013
2014
2015
2016
2017
UK inflation (CPI)
S
 ource: Thomson Reuters DataStream
Consumers have also been tapping
into their savings. The latest data
on the household savings ratio for
Q4 2016 shows it at its lowest level
in over 50 years. However, with
interest rates remaining low, debt
is relatively cheap to manage.
Chart 14. Savings Ratio
12
10
8
6
4
2
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016 2017
Source: Thomson Reuters DataStream
Unsecured consumer credit, which
includes credit cards, car loans and
second mortgages, grew by 10.5%
in the year to February. Growing
credit card debt drove the increase,
with the year-on-year growth rate
in credit card spending jumping to
9.3%, offsetting a slight decline in
other loans.
Chart 15. 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
UK consumer credit-net unsecured lending to individuals (%YOY)
U
 K personal borrowing: dwellings – net lending (%YOY) SADJ
Source: Thomson Reuters DataStream
6
2015
2016
2017
The Deloitte Consumer Tracker Q1 2017 | Confidence softens
Outlook
Modest slowdown in consumer spending expected
Looking ahead, consumers are
continuing to focus on spending.
According to our survey, they
expect to spend more on both
essentials and discretionary goods
in the next three months.
Chart 16. Category spending over the next three months
Net % UK consumers spending more by category
10%
5%
0%
-5%
-10%
-15%
-20%
2012
2013
2014
2015
2016
2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Essentials
Consumers remain broadly
confident, and record levels of
employment should ensure a
modest slowdown in consumer
spending rather than a collapse
during 2017.
Small-ticket items
Big-ticket items
Chart 17. Consumer expenditure (annual % change)
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Source: Thomson Reuters DataStream
However, it is clear that consumer
businesses can only absorb so
much of the cost pressures caused
by rising inflation as selling prices
are likely to increase at a much
slower rate than input costs.
If inflation continues on its current
trajectory, it is inevitable that
consumers will see a sharp rise
in prices.
Chart 18. Consumers expectations over the next 12 months
Difference
since 2015
Now thinking about 2017...What, if
anything, do you think will change
compared to 2016? Please indicate whether
each of the following areas are likely to
increase, decrease or remain the same?
Net % of UK consumers who
expect an increase (increase
minus decrease)
Q1 2014
Q1 2015
Q1 2017
Prices of goods in supermarkets
63%
38%
70%
32 points
Your spending on utilities
43%
23%
43%
20 points
The taxes you pay
13%
9%
26%
17 points
Your spending on grocery shopping for food
and non-alcoholic beverages
29%
15%
30%
15 points
The UK interest rates
29%
18%
26%
8 points
Your spending on transport
23%
13%
21%
8 points
Your housing expenditure
22%
19%
22%
3 points
Your level of debt
-12%
-15%
-14%
1 point
Your spending on non-essential categories
-7%
-2%
-3%
-1 point
The value of your property
30%
29%
27%
-2 points
Your income before tax
9%
9%
5%
-4 points
Your savings/investments
2%
10%
2%
-8 points
Your job security
NA
NA
-11%
NA
7
Contacts
Nigel Wixcey
Industry Leader, UK Consumer
& Industrial Products
020 7303 5007
[email protected]
Ian Geddes
Lead Partner, UK Retail
020 7303 6519
[email protected]
Simon Oaten
Partner, UK Travel,
Hospitality and Leisure
020 7007 7647
[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
17 March 2017 and 20 March 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.
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