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Based on responses from 3,187 UK consumers aged 18+ between 29 December 2023 and 1 Jan 2024, consumer confidence rose three percentage points (+2.8) to -11.4%, the fifth consecutive quarter of improved confidence.
This is an improvement of eight (+8.3) percentage points on Q4 2022.
Overall confidence was boosted by a seven percentage point (+7.2) increase in confidence in household disposable income (up 20 percentage points year-on-year) as consumers appear increasingly less pessimistic following the easing of inflation and interest rates.
However, at -27.7% the net sentiment measure for disposable income remains below its highest level of -10.3% back in Q1 2021, when consumers emerged from the pandemic with record levels of savings.
An uptick in spending on items such as alcohol and tobacco (+11.3 percentage points) led to an overall boost in discretionary spending over the last three months (+3.4 percentage points).
Spending on essentials was also higher than the previous quarter (+4.1 overall), namely due to a 21-percentage point increase in utility bills spend over the colder months.
In the final quarter of the year, to save or get more in return for their money, more consumers bought goods on promotion, took advantage of loyalty schemes, or shopped on the second-hand market, compared with the previous quarter.
Of those consumers who say they spent more in the last three months, 18% attribute this to buying more items because they were on sale or offer – up from 11% in the previous quarter.
This trend can also be seen amongst those consumers who report spending less in the last three months, with more (34%) saying this was due to taking advantage of sales and discounts than the previous quarter (29%).
Céline Fenech, consumer insight lead at Deloitte, commented: “We are seeing a more positive and resilient consumer continue to emerge from this prolonged period of high inflation and interest rates, albeit many are continuing with certain recessionary behaviours.
“While many are feeling more confident in their disposable income, we see that consumers are often making conscious purchasing decisions based on promotions and sales to get the most value in return for their hard-earned money.
“While a fifth consecutive quarter of improved consumer confidence provides an optimistic picture for the year ahead, consumers are likely to remain cautious, resulting in difficult trading conditions until inflation and interest rates fall – possibly in the second half of 2024.”
Additionally, consumer confidence about the state of the UK economy has risen to -44%, its highest rate since Q2 2021 and a 14 percentage point increase on the previous quarter. This comes as CFOs state that the threat of high inflation and further interest rate rises has weakened.
Consumers are also feeling more confident in their job security, which rose by four percentage points to -3% from the previous quarter, marking its second highest reading since Deloitte’s Consumer Tracker began in 2011.
Ian Stewart, chief economist at Deloitte, commented: “Despite slowing growth and high interest rates, consumer confidence remains resilient. The jobs market remains tight and, while unemployment has nudged higher, consumers are feeling more positive about their job security.
“With the worst of the inflation shock behind us, we see consumer spending starting to pick up in the second half of the year.”
