BY Fraser Tennant
A more positive economic landscape is helping to boost consumer confidence in the UK, according to a new report by Deloitte.
In its ‘Consumer Tracker Q1 2019’ report – based on the response of over 3000 consumers in the UK – Deloitte reveals that its UK consumer confidence index in Q1 rose 1 percentage point, to -8 percent, driven by greater optimism about personal finances.
Indeed, Deloitte notes that confidence in levels of disposable income and sentiment about levels of debt grew by 5 and 4 percentage points respectively in Q1 2019.
That said, Deloitte’s overall consumer confidence index remains close to a one-and-a-half year low, which suggests that it will not only take longer for positive economic news to restore consumer confidence to previous levels, but could also require greater certainty around how and when the UK leaves the EU.
“The bounce in consumer sentiment comes against a backdrop of heightened uncertainty around Brexit during the survey period in late March,” said Ian Stewart, chief economist at Deloitte. “Consumers also faced headwinds from a slowing global economy while at home housing activity has softened and consumer credit is less easy to come by. Despite the deluge of bad news consumer confidence has held up, fuelled by rising real incomes, a buoyant jobs market and ultra-low mortgage costs.
“Earnings growth has now outstripped inflation for 13 consecutive months, while unemployment is at its lowest level since 1975. Mortgage rates remain close to all-time lows,” he continues. “The key question for the UK consumer is whether growing corporate nervousness will trigger a squeeze on pay and jobs in the second half of the year.”
Overall UK consumer confidence is calculated by Deloitte as an aggregate of six individual measures: job security, job opportunities, household disposable income, level of debt, children’s education and welfare, and general health and wellbeing.
Ben Perkins, head of consumer research at Deloitte, concluded: “Brexit remains on the horizon and only when this uncertainty lifts will we be able to judge the underlying strength of the consumer market. Meanwhile, consumers continue to rebuild their finances, reflected in a slowdown in borrowing and an increase in savings.”