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Lancashire Times
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4:00 AM 24th November 2021
business

Consumer Confidence Rises In The North West But Falls Across The UK For First Time This Year



Consumer confidence fell by one percentage point in the third quarter of 2021, according to the latest Deloitte Consumer Tracker. Overall confidence was dented by reduced optimism around personal finances, specifically in the level of debt (down two percentage points to -4%) and household disposable income (down nine percentage points to -21%).

In the North West consumer confidence rose by three percentage points to -8%. This quarter all but one individual measure of confidence rose and there was an eight percentage point rise in confidence surround child’s education and welfare. The one measure that declined was household disposable income which dropped by eight percentage points to -18%.

David O'Leary
David O'Leary
David O’Leary, partner and consumer business lead in the North West at Deloitte, commented “Whilst overall confidence remains at the same level as Q3 2019, thus maintaining pre-pandemic confidence levels which returned last quarter, the end of furlough, removal of universal credit top-ups, and rising inflation have contributed to a quarterly fall nationally or the first time this year. The North West has bucked the trend as consumer confidence rose by three percentage points to -8%.

“However, in an indication that prices in both discretionary and essential categories are also beginning to creep up, 36% of consumers said their overall spending had increased in the last three months. This was primarily driven by rising utility bills and transport spending as more workers returned to offices.”

The Deloitte Consumer Tracker has been measuring UK consumer confidence on a quarterly basis for ten years. The latest analysis is based on responses from 3,185 UK consumers between 17th and 20th September 2021, 327 of which were from the North West.

Across the individual measures of confidence, the most improved measure was children’s education and welfare, which rose four percentage points nationally and eight points in the North West in Q3 2021 from the previous quarter. This marked improvement in confidence coincided with schools and universities reopening after the summer holidays.

‘Candidates’ market’ softens falling sentiment on economy

Confidence indicators in both job security, and job opportunities and career progression were also up on the previous quarter, by one and three percentage points respectively nationally and seven and five points in the North West, as job vacancies reached a 20-year high.

The current job market has buoyed consumers’ confidence about their own job security, up 14 percentage points in the North West and 11 across the UK from the same period a year ago. Consumers also continue to be confident around job opportunities and career progression, up 15 percentage points in the North West and 16 nationally from Q3 2020. This positive outlook is shared by businesses, with 29% of CFOs prioritising increased investment in the year ahead.

However, the UK workforce itself remains significantly smaller than it was before the COVID-19 pandemic began, posing additional headwinds to wider supply chain challenges.
Ian Stewart, chief economist at Deloitte, commented: “The dislocation of the last 18 months has created a huge supply-demand mismatch. A year ago the central economic problem was excess capacity and too few jobs; now it is insufficient capacity and too many jobs. With inflation well above its 2.0% target, and likely to rise further, the stage looks set for the Bank of England to raise interest rates by the end of this year.”


Record discretionary spend driven by leisure consumers

Consumers tipped discretionary spending into positive territory in Q3, to +2%, (+1% in the North West) for the first time since the Deloitte Consumer Tracker began ten years ago. Consumer enthusiasm for leisure spending following Q2’s reopening of the economy continued into the third quarter, aided by the reopening of more international borders. Strong spending was seen across almost every leisure subsector, most notably on holidays (short and long), culture and entertainment, and attending live sports events.

David O’Leary said: “Following the reopening of the hospitality sector, hotels and restaurants have quickly found that amid the strong consumer demand, one of the key challenges to its recovery has been staffing.

“Hospitality businesses have been more than twice as likely as other industries to be experiencing challenges in filling vacancies compared with normal expectations for this time of year. This is particularly challenging as these businesses want to put good, personalised customer service at the centre of their post-pandemic offering and the lack of staff hinders this effort.”

Consumers primed to spend early for Christmas

Respondents also indicated that they expect to reduce their spending over the next three months, including over the festive period, from its current peak, with consumers’ discretionary spending in Q4 anticipated to fall by five percentage points nationally and seven percentage points in the North West compared to Q3. However, this represents a ‘normalisation’ of spending patterns going into the retail sector’s ‘golden quarter’, coming down from second and third-quarter highs.

David O’Leary added: “Following the cancellation of many Christmas plans last year due to the pandemic, consumers demand remains very strong and many will be looking to make up for missed celebrations. However, consumer behaviours are already reflecting concerns on the availability of some goods, with early birds already making a start on their Christmas shopping to avoid possible disappointment.

“For retailers, an extended Christmas shopping period is in many ways beneficial, spreading demand over a longer period, smoothing peaks and potentially reducing the need for price discounting. In anticipation of ongoing supply chain disruption, some retailers have brought Christmas merchandise to shop floors earlier to ensure consumers can find what they need for the festive period. However, others may be subject to longer-term disruption, potentially creating shortages in more popular party season and gifting categories, including clothing, toys, and furniture.”