Confidence gathers pace across the UK
The North of England, Scotland and Northern Ireland saw a sharp rise in consumer confidence in Q2 2014, according to the latest Deloitte Consumer Tracker. While consumers in London and the South East are the most confident, the North of England, Scotland and Northern Ireland saw consumer sentiment about household disposable income jump six percentage points from -25% in Q1 2014 to -19% in Q2 2014.
Across the UK, overall consumer confidence in Q2 2014 was four points higher than the same period a year ago (from -10 in Q2 2013 to -6 in Q2 2014). Sentiment about disposable income was up 11 points (from -29 in Q2 2013 to -18 in Q2 2014).
The tracker also shows more consumers started a job (from 8% in Q2 2013 to 11% in Q2 2014) and fewer reported a loss or reduction of income (from 14% in Q2 2013 to 12% in Q2 2014).
Consumers indicated they are spending less on essential items, but spending more on discretionary items like clothing and footwear, which saw a nine point improvement (from -15% in Q2 2013 to -6% in Q2 2014).
Ben Perkins, head of consumer business research, commented: “Low inflation, or in some cases deflation, means that consumers are getting more for their money. Combined with the rising confidence in household disposable income, consumers are edging away from the defensive spending habits they adopted during the recessionary years and spending more on the things they enjoy.”
However, while most measures of confidence are up, consumers’ confidence in their level of debt fell by two percentage points (from -3% in Q1 2014 to -5% in Q2 2014), suggesting consumers may be responding to the prospect of future rises in interest rates.
Looking forward to Q3 2014, consumers indicated they plan on spending more on non-essentials like electrical items, eating out and short breaks, as well as spending less on utilities. However, while economists forecast a rise in real earnings over the next year, the Tracker shows that consumers are less optimistic.
Ian Stewart, chief economist at Deloitte, said: “We found half of working UK adults don’t think their salaries will increase in the next year. Such concerns, together with the forecast of higher interest rates, may explain why consumers have told us they are planning to repay more debt and save more in the next quarter.
“Over the next year, the question will be whether any rise in real incomes will be enough to counter the effect of potentially higher interest rates.”
