While Brexit has shaken the confidence of many business leaders, low inflation has helped consumers shrug off such concerns, according to a new survey.
The latest Deloitte Consumer Tracker – based on a survey of 3,000 UK adults conducted between 16 and 18 September 2016 – recorded a three percentage point increase in consumer confidence on the previous quarter. This was the largest quarterly increase in confidence in 18 months.
Job security, job opportunities and career progression had seen particularly strong gains in optimism, reported Deloitte. Confidence in job security rose by six percentage points quarter-on-quarter, after falling for the previous three consecutive quarters.
The survey also showed that consumer spending was continuing to shift from everyday essentials to discretionary items, with spending on clothes and groceries flat for the second consecutive quarter, but spending on discretionary categories up by one percentage point.
Consumer spending had probably been boosted by the good weather and the country’s sporting success over the summer, suggested Deloitte head of consumer research Ben Perkins.
Consumers prioritise experiences
“The gap between leisure and retail spending is narrowing as consumers continue to prioritise spending on experiences, such as holidays and days out, rather than goods and services,” he added.
And, in contrast to the business community, with chief financial officers on the defensive following the EU Referendum, UK consumers have put Brexit fears to one side, said Deloitte chief economist Ian Stewart.
“Consumers are benefiting from favourable tailwinds, including low inflation, low unemployment and relatively high disposable incomes,” he added.
Confidence down in London
In contrast to many parts of the country, however, consumer confidence in London fell and is now lower than the rest of the UK.
Brexit uncertainty is a likely reason for this disparity, said Deloitte, particularly due to the fact the majority of Londoners had voted to remain in the EU.
“The Brexit vote may be weighing on a region in which 60% of the population voted to Remain and where reliance on financial services, migration and capital flows are especially strong,” said Stewart.
Deloitte added that consumer-focused economic fundamentals showed few signs of slowing, and that it expected retail sales growth to continue into the fourth quarter.
It warned, however, that consumer spending could be challenged from 2017 when faced by the prospects of higher inflation and the formal Brexit process.