Confidence remains flat but job worries cloud outlook...Head of Research Consumer & Industrial...
Transcript of Confidence remains flat but job worries cloud outlook...Head of Research Consumer & Industrial...
Q2 2016
Deloitte’s latest Consumer Tracker shows that consumer confidence in job security has fallen three points in the immediate aftermath of the EU referendum, and is down six points compared to this time last year.
Confidence in job opportunities has also fallen since last quarter, showing consumers feel less certain about their job prospects as the consequences of Brexit continue to unfold. Overall, our headline measure of consumer confidence remains at -8, its lowest level since Q4 2014.
When asked how the result of the EU referendum would impact upon their personal financial situation and spending habits in the next 12 months, consumers’ response was strongly negative. Consumers are also concerned about the affordability of their grocery and non-essential spending. Post-Brexit inflation forecasts predict a rise in the next year. The Treasury recently raised its forecast to an average of 1.3% inflation for 2016, up from 0.5% in June, and to 2.5% in 2017.
Sentiment about jobs among younger consumers is more negative than for older consumers. While overall confidence is flat quarter-on-quarter for 18-34 year olds due to an 18 point rise in health and well-being, their confidence about job security falls by seven points, and confidence in their career progression by nine points.
Consumer spending remains largely stable. Expenditure continues to shift from essentials to discretionary categories. Net spending on essentials was flat quarter-on-quarter, while net spending on discretionary categories rose by three points, suggesting more consumers are spending more in non-essential areas. This is reflected in retail sales growth of 2% in the first half of the year. However, leisure spending continues to grow at a faster rate than retail spending, as consumers prioritise spending on experiences.
It remains to be seen what impact political and economic uncertainty will have on the consumer market. Consumer-focused economic fundamentals remain favourable – for example, inflation, unemployment and the cost of borrowing are still all low – but for how much longer?
Consumers expect to spend more in most categories in the next three months, but beyond then their outlook is more cautious. Significantly, it is consumers in the higher social grades as well as younger consumers that are reporting lower levels of confidence for the next 12 months across a range of measures relating to their personal finances.
Overall consumer confidence (q/q)*
Previous
Latest
-8%-8%
AuthorsBen PerkinsHead of Research Consumer & Industrial Products020 7307 [email protected]
Aino TanResearch Manager Consumer & Industrial Products020 7007 [email protected]
Rebecca ThomsonResearch ManagerConsumer & Industrial Products020 7007 [email protected]
Confidencein level ofjob security (q/q)*
Previous
Latest
-7%-10%
Essentialsspending(y/y)*
Previous
Latest
+5%+5%
Discretionaryspending(y/y)*
Previous
Latest
-5%-3%
ONS retailsales value growthJune-16 (y/y)
Previous
Latest
+1.3%+1.8%
CPI inflation June-16 (y/y)
Previous
Latest
+0.0%+0.5%
Key indicators
*Net balances
The Deloitte Consumer TrackerConfidence remains flat but job worries cloud outlook
Chart 1. Consumer sentiment about job securityNet % of UK consumers who said their level of confidence in job security has improved over the past three months
-20%
-16%
-12%
-8%
-4%
0%
Q216
Q116
Q415
Q315
Q215
Q115
Q414
Q314
Q214
Q114
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Q411
Q311
Consumer confidenceOverall consumer confidence was flat
Consumers reported feeling less confident about the security of their jobs in the immediate aftermath of the EU referendum. The confidence readings fell three points from the previous quarter and is now down six points compared to this time last year.
Unemployment data up to May 2016 shows the unemployment rate in the UK has continued to fall over the past year, reaching its lowest level since 2005. This indicates that while consumers are clearly concerned about jobs, these concerns are not yet being reflected by the official statistics.
Three of the six measures of confidence fell compared to the same time last year. Confidence in job security, career opportunities and progression, and children’s education and welfare all fell. Confidence in disposable income, level of debt, and health and well-being all rose.
Overall consumer confidence was flat at -8, its lowest level since 2014.
Chart 2. UK consumer sentiment about personal situationNet % of consumers who said their level of confidence has improved in the past three months
Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016
Yourhouseholddisposable
income
Your levelof debt
Your generalhealth andwellbeing
Your jobopportunities/
careerprogression
Your jobsecurity
Your children’seducation
and welfare
-40%
-30%
-20%
-10%
0%
10%
-36%
-29%
-18% -1
5% -14%
-8% -5
%-1
2% -11%
-12% -1
0%-3
%-5
%-7
%
-11%
-7% -4
%-4
%-1
0%
-2% 0% 2% 1%
-4%
-15% -1
3%
-8% -5
% -4% -1
%
Chart 3. Deloitte consumer confidence Net % of consumers who said their level of confidence has improved in the past three months
-20%
-16%
-12%
-8%
-4%
0%
Q216
Q116
Q415
Q315
Q215
Q115
Q414
Q314
Q214
Q114
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Q411
Q311
2
The Deloitte Consumer Tracker Q2 2016 | Confidence remains flat but job worries cloud outlook
Consumer confidenceConfidence among high earners falls significantly
Sentiment about job security was significantly lower for younger consumers than it was for older consumers. It fell by seven points compared to the previous quarter for 18-34 year olds, but remained flat for those aged 55 and over.
Chart 4. Consumer sentiment about job security by age groupNet % of consumers who said their level of confidence has improved in the past three months
-30%
-20%
-10%
0%
10%
Q216
Q116
Q415
Q315
Q215
Q115
Q414
Q314
Q214
Q114
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Q411
Q311
18-34 35-54 55+
Consumers earning over £100,000 a category representing only 2.3% of consumers surveyed, reported a fall in overall confidence of 13 points compared to last quarter, and a fall in job security of 28 points.
Chart 5. Consumer confidence for high earnersNet % of UK consumers with annual household earnings of over £100,000 who say their confidence has improved
-30%
-20%
-10%
0%
10%
20%
Q216
Q116
Q415
Q315
Q215
Q115
Q414
Q314
Q214
Q114
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Q411
Q311
Consumer confidence Job security
People with an annual household income of less than £25,000 a year reported rises in confidence in nearly every category year-on-year, with the exception of job security, which has remained flat.
Chart 6. Overall confidence of low earnersNet % of UK consumers with annual household earnings of under £25,000 who say their confidence has improved
Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016
Yourhouseholddisposable
income
Your levelof debt
Your generalhealth andwellbeing
Your jobopportunities/
careerprogression
Your jobsecurity
Your children’seducation
and welfare
-50%-45%-40%-35%-30%-25%-20%-15%-10%
-5%0%5%
-44% -4
1%-2
9% -26%
-19%
-20% -1
5%-8
%-1
0%-4
%
-20%
-20%
-14%
-20% -1
7% -15% -1
3%-7
%-1
0% -8%
-10% -8
% -5% -3
% -2%
1%-2
%-2
%
-7%
-7%
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The Deloitte Consumer Tracker Q2 2016 | Confidence remains flat but job worries cloud outlook
Consumer spendingConsumer spending remains stable
On balance net consumer spending on essentials remains flat. However, the shift from essentials to discretionary spending continues, with net spending on both big and small ticket discretionary items rising.
The categories with the biggest quarter-on-quarter rises in net spending were alcoholic beverages, clothing and footwear, and long break holidays.
Chart 7. Essentials vs discretionary spendingNet % UK consumers spending more by category spending
-20%-15%-10%
-5%0%5%
10%15%20%
Q216
Q116
Q415
Q315
Q215
Q115
Q414
Q314
Q214
Q114
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Q411
Q311
Essentials Small-ticket items Big-ticket items
Consumer expenditure data up to the first quarter of 2016 shows growth in spending is flattening, with a marginal fall of 0.1% in the growth rate from the first quarter of 2015.
Chart 8. Consumer expenditureAnnual % change year on year
-5%-4%-3%-2%-1%0%1%2%3%4%
Q116
Q115
Q114
Q113
Q112
Q111
Q110
Q109
Q108
Q107
Q106
Our data shows that over the last three months consumers report spending more in almost every category compared to last year. The only category where spending has fallen year-on-year is for long-break holidays. Quarter-on-quarter, every category with the exception of utilities has risen.
Chart 9. Category spending in the last three monthsNet spending in the last three months
Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016
Gro
cery
shop
ping
for f
ood
and
non-
alco
holic
bev
erag
es
Alco
holic
bev
erag
esan
d to
bacc
o
Hou
sing
(e.g
. ren
t, m
ortg
age)
Util
ity b
ills (e
.g. w
ater
,el
ectri
city,
fuel
s)
Furn
iture
and
hom
ewar
e
Maj
or h
ouse
hold
app
lianc
es
Hea
lth
Tran
spor
t
Land
line/
mob
ile p
hone
,In
tern
et a
nd T
V su
bscr
iptio
ns
Elec
trica
l equ
ipm
ent
Goi
ng o
ut
Rest
aura
nts a
nd h
otel
s
Hol
iday
s (lo
ng b
reak
)
Clot
hing
and
foot
wea
r
-30%
-20%
-10%
0%
10%
20%
30%
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The Deloitte Consumer Tracker Q2 2016 | Confidence remains flat but job worries cloud outlook
Retail sales data shows sales values have performed relatively well over the first half of the year. In June, retail sales values were up by 1.8% on the previous year.
Chart 10. Retail sales% change in volume and value year-on-year
-6%-4%-2%0%2%4%6%8%
Value Volume
Q216
Q215
Q214
Q213
Q212
Q211
Q210
Q209
Q208
Q207
Q206
Inflation is still low across most categories, with competition keeping prices down in grocery and promotions doing so in clothing and footwear. However, in June overall inflation rose to 0.5% from 0.3% in May. Inflation forecasts have started to predict a larger rise in the second half of 2016 and into 2017.
Chart 11. Inflation (CPI)% change year-on-year
0.5%0.0%
0.8%
1.1%0.1%
-1.0%
-0.2%-1.8%
-0.3%
-0.7%
-2.9%-2.2%
2.3%1.9%
3.7%1.1%
2.7%1.6%
0.5%2.3%
-0.5%
-0.8%
0.1%0.4%
4.8%10.0%
June 2016 June 2015
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
Compared to a year ago, the proportion of consumers displaying both expansionary and defensive behaviours has remained static. The gap between the two has continued to narrow quarter-on-quarter, suggesting consumers are becoming more measured in their spending.
Chart 12. Expansionary and defensive spending behaviour% UK consumers spending more or less
20%
22%
24%
26%
28%
Q216
Q116
Q415
Q315
Q215
Q115
Q414
Q314
Q214
Q114
Q413
Q313
Q213
Q113
Q412
Q312
Q212
Q112
Q411
Defensive Expansionary
Consumer spendingConsumer spending remains stable
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The Deloitte Consumer Tracker Q2 2016 | Confidence remains flat but job worries cloud outlook
BrexitUncertainty over the next 12 months
When asked about prospects for the coming 12 months in the light of the result of the EU referendum, consumers’ response was strongly negative in all seven areas. Non-essential spending is the area where consumers feel least confident over the next 12 months. This was closely followed by their overall personal financial situation, and savings and investments. UK house prices was the area where people feel least concerned.
People in higher social grades reported significantly lower levels of confidence across all measures than people in lower social grades.
Younger consumers, who in the past have shown greater levels of optimism, are significantly more negative about the coming 12 months than older consumers.
Chart 13. Consumer confidence after EU ReferendumNet % of UK consumers who said their confidence about the next 12 months has improved
Your
spe
ndin
g on
non-
esse
ntia
l ca
tego
ries
e.g.
ho
liday
s, go
ing
out,
etc.
Your
ove
rall p
erso
nal
finan
cial s
ituat
ion
Your
sav
ings
/in
vest
men
ts
Your
spe
ndin
g on
gr
ocer
y sh
oppi
ng fo
r fo
od a
nd n
on-a
lcoho
lic
beve
rage
s
Your
inco
me
befo
reta
x e.
g. w
ages
,ov
ertim
e, b
onus
Your
job
secu
rity
Affo
rdab
ility
UK
hous
e pr
ices
-40%
-30%
-20%
-10%
0%
-37% -35% -35% -33%-25%
-19%-14%
Chart 14. Consumer confidence by social grade Net % of UK consumers who said their confidence about the next 12 months has improved
-50%
-40%
-30%
-20%
-10%
0%
-41% -3
3%
-40%
-29%
-38% -3
0%
-37%
-28% -27% -2
2% -21% -1
7%
-17%
-9%
ABC1 C2DE
Your
spe
ndin
g on
non-
esse
ntia
l ca
tego
ries
e.g.
ho
liday
s, go
ing
out,
etc.
Your
ove
rall p
erso
nal
finan
cial s
ituat
ion
Your
sav
ings
/in
vest
men
ts
Your
spe
ndin
g on
gr
ocer
y sh
oppi
ng fo
r fo
od a
nd n
on-a
lcoho
lic
beve
rage
s
Your
inco
me
befo
reta
x e.
g. w
ages
,ov
ertim
e, b
onus
Your
job
secu
rity
Affor
dabi
lity
UK
hous
e pr
ices
Chart 15. Consumer confidence by age Net % of UK consumers who said their confidence about the next 12 months has improved
18-24 25-34 35-44 45-54 55+
Your
ove
rall
pers
onal
fina
ncia
l s
ituat
ion
Your
inco
me
befo
reta
x e.
g. w
ages
,ov
ertim
e, b
onus
Your
spe
ndin
g on
groc
erys
hopp
ing
for
food
and
non
-al
coho
lic b
ever
ages
Your
spe
ndin
g on
non
-es
sent
ial c
ateg
orie
se.
g. h
olid
ays,
goin
gou
t, et
c.
Your
sav
ings
/in
vest
men
ts
Affor
dabi
lity
UK
hous
e pr
ices
Your
job
secu
rity
-50%
-40%
-30%
-20%
-10%
0%
-41
%
-30
%
-42
%-3
8% -3
0%
-32
%
-6%
-29
%-2
7% -2
1%
-34
%
-15
%
-36
% -31
% -23
%
-34
% -26
%
-42
%-4
0% -3
2%
-48
%
-30
%
-45
%-4
3% -3
4%
-37
%
-33
%
-38
%-3
9% -3
1%
-7%
-12
%
-18
%-2
1%
-11
%
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The Deloitte Consumer Tracker Q2 2016 | Confidence remains flat but job worries cloud outlook
OutlookPossible headwinds in the coming months
In the coming three months consumers plan to spend more on holidays and going out, groceries and big ticket items such as furniture and appliances. They expect to spend less on clothing and footwear.
Chart 16. Spending over next three monthsNet % of UK consumers spending more by category
Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016
Clot
hing
and
foot
wea
r
Rest
aura
nts
and
hote
ls(e
atin
g ou
t and
shor
t bre
ak)
Alco
holic
bev
erag
esan
d to
bacc
o
Goi
ng o
ut (e
.g. c
inem
a,th
eatr
e, c
once
rts,
etc.
)
Elec
tric
al e
quip
men
t
Maj
or h
ouse
hold
appl
ianc
es
Furn
iture
and
hom
ewar
e
Hol
iday
s (lo
ng b
reak
)
Hou
sing
(e.g
. ren
t,m
ortg
age,
mai
nten
ance
)
Tran
spor
t
Gro
cery
sho
ppin
g fo
rfo
od a
nd n
on-a
lcoh
olic
beve
rage
sU
tility
bills
(e.g
. wat
er,
elec
tric
ity, g
as a
ndot
her f
uels)
-20%
-10%
0%
10%
20%
Chart 18. Economic confidenceConsumer confidence in the general economic situation over the coming 12 months
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
Q216
Q215
Q214
Q213
Q212
Q211
Q210
Q209
Q208
Q207
Q206
Source: GfK
Chart 17. Deloitte UK CFO SurveyNet % of CFOs who are more optimistic about the financial prospects of their company than three months ago
-80%-70%-60%-50%-40%-30%-20%-10%
0%10%20%30%40%50%
Q216
Q315
Q314
Q313
Q312
Q311
Q310
Q309
Q308
Q307
Consumers’ confidence in the wider economy has seen a sharp fall since the EU referendum. Confidence in the general economic situation is now 33 points lower than at the same time last year, as uncertainty about the UK’s prospects once it leaves the EU affects consumer sentiment.
Sentiment among the Chief Financial Officers of the UK’s largest corporates has fallen sharply in the wake of the EU referendum, the Deloitte CFO survey has shown in Q2 2016. Perceptions of uncertainty have soared in the wake of the vote to levels associated with the euro crisis five years ago. The spike in uncertainty has had an immediate effect on business sentiment with optimism dropping to the lowest level since the survey started in 2007, lower than in the wake of the failure of Lehman Brothers in late 2008.
7
The Deloitte Consumer Tracker Q2 2016 | Confidence remains flat but job worries cloud outlook
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Contacts
Nigel WixceyIndustry Leader, Consumer & Industrial Products020 7303 5007 [email protected]
Ian GeddesLead Partner, UK Retail020 7303 6519 [email protected]
Graham PickettLead Partner, UK Travel, Hospitality and Leisure01293 761232 [email protected]
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 24 and 27 June 2016.
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.