Signs of a consumer slowdown The Deloitte Consumer Tracker · 2020-07-27 · The Deloitte Consumer Tracker Q3 2019 Deloitte consumer confidence index Net % of consumers who said their

Signs of a consumer slowdownThe Deloitte Consumer TrackerQ3 2019

The Deloitte Consumer Tracker Q3 2019

Contents

02

Consumer confidence 04

Deloitte consumer confidence index 05

Individual measures of consumer confidence 06

The wider economy and its impact on 13 consumer confidence

UK earnings growth slows after hitting a decade high 14

UK unemployment rises as concerns about 15 Brexit hit the labour market

Consumer borrowing rises at slowest rate since 2014 16

Saving ratio healthier than previously thought 17

Consumer spending 18

Consumer spending in the last three months 19

Retail 21

Retail sales (excl. fuel) 22

Grocery shopping by channels 24

Purchases of consumer product categories 25 by channels

Leisure 26

UK consumer leisure spending in the last three months 27

Leisure spending in the last three months by category 28

Automotive 29

UK car registrations 30

UK car registrations year to date 31

Car purchase plans 32

Affordability of car repayments 33

Outlook 34

The last word 39

The last, last word 40

Contacts 41


Q3 2019 at a glance

*Net balances

Previous

Latest

-8%-9%

Overall consumer confidence (q/q)*

Previous

Latest

-16%-18%

Confidence inlevels of disposable income (q/q)*

Previous

Latest

-5%-3%

Confidence in levels of debt (q/q)*

Previous

Latest

-7%-8%

Confidence in job security (q/q)*

Previous

Latest

-1%-6%

Confidence in job opportunities (q/q)*

03

Consumer confidence

04


Deloitte consumer confidence index

Net % of consumers who said their level of confidence has improved in the past three months

-18

-16

-14

-12

-10

-8

-6

-4

-2

0

Source: The Deloitte Consumer Tracker

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q

3 20

19Annual moving average

The Deloitte consumer confidence index fell to -9 per cent in Q3 2019.The index was one point lower than in the previous quarter and two points lower compared to the same period a year ago.Six months after the UK was given an extension to delay its departure from the EU until 31 October, the uncertainty surrounding Brexit has persisted and appears to be weighing more heavily on consumers.

*�The�Deloitte�consumer�confidence�index�is�an�average�of�the�net�%�of�consumers�who�said�their�level�of�confidence�improved�in�the�past�three�months�for�six�individual�measures�of�confidence�(see�next�slide).

05


Individual measures of consumer confidence

Current Q3 2019net balances

% point change quarter on quarter

% point change year on year

Household disposable income -2 +1-18%

Levels of debt +2 +3-3%

Job security -1 -3-8%

Job opportunities/career progression -5 -5-6%

General health and wellbeing -2 -5-18%

Children’s education and welfare -1 -3-3%

Source: The Deloitte Consumer Tracker*Please note this measure is not included in the overall index

NEW MEASUREThe state of the UK economy* N/A N/A-55%

Our overall confidence index is based on six individual measures of confidence

06


Consumer confidence about their household levels of disposable income

With falling inflation and earnings hitting a decade high in July consumers were marginally more confident in their levels of disposable income.Confidence in levels of disposable income was one point higher than it was a year ago (‑19 per cent).In particular, confidence in levels of disposable income among the 18‑ to 34‑year olds improved from ‑17 per cent a year ago to ‑7 per cent this quarter, which could be attributed to the nearly 5 per cent rise in the national living wage in April.

Net % of consumers who said that their confidence in their levels of household disposable income has improved in the past three months

-44-40-36-32-28-24-20-16-12

-8-40


Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Annual moving average

07


Consumer confidence about their levels of debt

Net % of consumers who said that their confidence in their levels of debt has improved in the past three months

-16

-14

-12

-10

-8

-6

-4

-2

0

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019



Confidence in levels of debt increased by two percentage points compared to Q2 2019 and by three points compared to the same period a year ago.This coincides with the Bank of England’s (BoE) decision to maintain interest rates at 0.75 per cent in August.Moreover, lenders have become more cautious and as a result the year‑on‑year growth rate for all unsecured lending including cars and credit cards slowed to 4.9 per cent in August, its lowest rate in almost four years.

08


Consumer confidence about job security

Sentiment about job security was also hit and was three points lower (at -8 per cent) this quarter comparedto Q3 2018.There was an increasing number of job cuts being announced, as well as major companies going into administration or restructuring their operations in Q3 2019.

Net % of consumers who said that their confidence in their job security has improved in the past three months

-16

-14

-12

-10

-8

-6

-4

-2

0

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019



09


Consumer confidence about job opportunities

Confidence in job opportunities/career progression fell by a significant five percentage points (to -6 per cent) compared to both the previous quarter and the same period a year ago.Unemployment unexpectedly rose from a four‑decade low in the three months to August.In fact, according to the latest Deloitte CFO Survey, 70 per cent of CFOs expect to reduce hiring in the next 12 months and just three per cent expect it to rise.

Net % of consumers who said that their confidence in their job opportunities and their career progression has improved in the past three months

-16-14-12-10

-8-6-4-202


Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019


10


Consumer confidence about their general health and wellbeing

Consumers continue to be less confident about their general health and wellbeing this quarter.Consumer confidence in their general health and wellbeing fell by two percentage points quarter on quarter from ‑16% to ‑18% in Q2 2019.

Net % of consumers who said that their confidence in their general health and wellbeing has improved in the past three months

-20

-18-16-14-12-10

-8-6-4-20


Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019


11


Consumer confidence about their children’s education and welfare

Sentiment about children’s education and welfare also falls this quarter.Consumer confidence in their children’s education and welfare has fallen by one percentage point this quarter.

Net % of consumers who said that their confidence in their children s education and welfare has improved in the past three months

-8-7-6-5-4-3-2-101234


Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019


12

The wider economy and its impact on consumer confidence

13


UK earnings growth slows after hitting a decade high

Wage growth, including bonuses, rose by an annual 3.8 per cent in the three months to August, slowing from 3.9 per cent in the three months to July.Meanwhile UK inflation remained at 1.7 per cent in September its weakest level since December 2016. The lower rate was driven by the prices of motor fuels, second‑hand cars, and electricity, gas and other fuels.

-1

0

1

2

3

4

5

6

CPI Inflation vs average earnings (inc. bonuses) (year-on-year % growth)

Source: Refinitiv Datastream

CPI inflation Average earnings including bonuses

Sep

2009

Mar

201

0

Sep

2010

Mar

201

1

Sep

2011

Mar

201

2

Sep

2012

Mar

201

3

Sep

2013

Mar

201

4

Sep

2014

Mar

201

5

Sep

2015

Mar

201

6

Sep

2016

Mar

201

7

Sep

2017

Mar

201

8

Sep

2018

Mar

201

9

Sep

2019

14


UK unemployment rate rises as concerns about Brexit hit the labour market

Britain’s labour market remains low by historical standards however there are signs of a possible weakening as the UK gets closer to leaving the EU.Although unemployment remains low, it rose by 0.1 percentage points to 3.9 per cent between June and August compared with the previous quarter.Indeed, while employment rate is still rising year‑on‑year, the growth has cooled noticeably in recent months.

0

1

2

3

4

5

6

7

8

9

10

UK unemployment rate (all aged 16 and over)


Jul 2

009

Jan

2010

Jul 2

010

Jan

2011

Jul 2

011

Jan

2012

Jul 2

012

Jan

2013

Jul 2

013

Jan

2014

Jul 2

014

Jan

2015

Jul 2

015

Jan

2016

Jul 2

016

Jan

2017

Jul 2

017

Jan

2018

Jul 2

018

Jan

2019

Jul 2

019

15


Consumer borrowing rises at slowest rate since 2014

UK consumer credit growth slows to lowest rate in five years.According to the Bank of England, growth in consumer borrowing dropped to 5.4 per cent in August, the slowest rate since 2014.

-4

-2

0

2

4

6

8

10

12

Unsecured lending to individuals


UK consumer credit – Net unsecured lending to individual (% year-on-year)

Aug

2008

Dec

200

8Ap

r 20

09Au

g 20

09D

ec 2

009

Apr

2010

Aug

2010

Dec

201

0Ap

r 20

11Au

g 20

11D

ec 2

011

Apr

2012

Aug

2012

Dec

201

2Ap

r 20

13Au

g 20

13D

ec 2

013

Apr

2014

Aug

2014

Dec

201

4Ap

r 20

15Au

g 20

15D

ec 2

015

Apr

2016

Aug

2016

Dec

201

6Ap

r 20

17Au

g 20

17D

ec 2

017

Apr

2018

Aug

2018

Dec

201

8Ap

r 20

19Au

g 20

19

16


Saving ratio healthier than previously thought

Household finances are healthier than previously thought after revision to the saving ratio.The main change came from the reclassification of students’ loans as government debt, which helped push up the household saving ratio. In the first quarter, the household saving ratio was revised up to 6.4 per cent from 4.1 per cent and rose again to 6.8 per cent in the second quarter, helped by higher earnings growth.

3

6

9

12

15

UK households’ saving ratio


Q3

2009

Q1

2010

Q3

2010

Q1

2011

Q3

2011

Q1

2012

Q3

2012

Q1

2013

Q3

2013

Q1

2014

Q3

2014

Q1

2015

Q3

2015

Q1

2016

Q3

2016

Q1

2017

Q3

2017

Q1

2018

Q3

2018

Q1

2019

Q3

2019

17

Consumer spending18


Consumer spending in the last three months

Lower inflation is easing pressures on essential items.Consumers have been reducing their net spending on groceries, utilities and transport an indication that lower inflation is easing cost pressures of essential items.As a result, leisure sector categories such as going out to the cinema or to a restaurant have seen a strong recovery compared to the same period a year ago. A sign that people continue to favour experiences over goods.

See leisure section for more information.

Net % UK consumers spending more by category over the last three months

-20 -15 -10 -5 0 5 10 15 20 25Going out

Restaurants and short break holidaysAlcoholic beverages and tobacco

Furniture and homewareClothing and footwear

Electrical equipmentMajor household appliances

Holidays & Hotels (long break)Education

Health

Landline/mobile phone,internet and cable/TV subscriptions

Pensions and insuranceHousing

TransportUtility bills

Grocery


Q2 2019Q3 2019 Q3 2018

Mor

e sp

endi

ng

Less

spe

ndin

g

19


Inflation remain at its lowest in three years

-1 0 1 2 3 4 5 6

Clothing & Footwear

Transport

Recreation & Culture

Total inflation

Miscellaneous goods & Services

Food & Non-alcoholic beverages

Furn,HH equip & Repair of the house

Housing, Water & Fuels

Health

Alcoholic beverages, Tobacco& Narcotics

Hotels, Cafes & Restaurants

Education

Communication


September 2019 August 2019 September 2018

CPI inflation by category (% change y/y)4.1%

3.6%0.9%

3.2%3.1%

2.9%3.2%

2.8%2.5%

3.0%3.3%

4.1%2.6%

2.4%2.6%

2.0%2.4%

2.7%1.9%

0.8%0.5%

1.8%1.8%

1.5%1.7%1.8%

-0.3%1.7%1.7%

2.4%1.4%

1.2%3.0%

0.6%1.4%

5.6%-1.0%-0.9%

-0.4%

UK inflation drops to lowest level since late 2016.The largest downward contributions to change in the inflation rate, between August and September 2019, came from motor fuels, second‑hand cars, and electricity, gas and other fuels.These downward movements were offset by upward movements from furniture, household appliances, hotel overnight stays, and from recreation and culture items.

20

Retail21


Retail sales (excl. fuel)

There was a modest rise in the September’s retail sales reported by the ONS.UK consumers bought 0.6 per cent more in Q3 2019 compared to Q2 2019 and 3.1 per cent more than a year ago. However people seemed to have bought fewer non‑essential items in the past month, with almost all areas of non‑food retail reporting falling sales quarter on quarter.With more retailers going into administration and department store sales slowing, structural challenges around cost and competition continue and there is a clear divergence of performance across categories and business models.

% change in volume and value year-on-year


VolumeValue Annual moving average


-3-4-5

-2-1012345678

Sep

2014

Dec

201

4M

ar 2

015

Jun

2015

Sep

2015

Dec

201

5M

ar 2

016

Jun

2016

Sep

2016

Dec

201

6M

ar 2

017

Jun

2017

Sep

2017

Dec

201

7M

ar 2

018

Jun

2018

Sep

2018

Dec

201

8M

ar 2

019

Jun

2019

Sep

2019

22


Online sales

Online retailers continue to report strong growth, outperforming the high street. Online spending now accounts for 19.1 per cent of all retail spending.Online sales rose in almost all categories compared to last year, led by non‑store retailers including pureplays (+13.3%) and household goods stores (+11.6%) and followed by grocers (+7.1%), clothing, footwear and textiles stores (+6.6%) and other – including key categories such as electricals – retailers (+1.6%). Sales were down year‑on‑year at department stores (‑3.6%).

UK Internet sales as a % of total retail sales


0

5

10

15

20

25

Sep

2007

Mar

200

8Se

p 20

08M

ar 2

009

Sep

2009

Mar

201

0Se

p 20

10M

ar 2

011

Sep

2011

Mar

201

2Se

p 20

12M

ar 2

013

Sep

2013

Mar

201

4Se

p 20

14M

ar 2

015

Sep

2015

Mar

201

6Se

p 20

16M

ar 2

017

Sep

2017

Mar

201

8Se

p 20

18M

ar 2

019

Sep

2019

23


Grocery shopping by channels

Grocery shopping online gains shares.While official share of online grocery runs at 6 per cent our data shows 20 per cent of consumers do some of their main grocery shopping online on an average month.As store openings focus on smaller formats, larger stores are losing shares as a channel for main grocery shop to convenience stores and online websites.

Source: Deloitte Consumer Tracker

Q3 2018Q3 2019 Q3 2017 Q3 2016

Channel usage for main grocery shop

Specialist food/drink store

Convenience store

High street or town centre supermarket

Online websites

Discount supermarket

Large supermarkets

5%6%

5%6%

62%66%

65%65%

33%33%

31%29%

19%22%22%22%

20%15%

17%19%

6%5%

7%8%

24


Purchases of consumer product categories by channelsThinking about the LAST purchase you made from eachof the following categories, where did you make your purchase from?

% consumers who last bought in the category


An online website on my laptop/desktop computer

0% 20% 40% 60% 80% 100%Beauty and personal care

Children and baby products, excluding clothesClothing and footwear

Car, motorcycle and bicycleFurniture and homeware

Sports, fitness and outdoors equipmentToys, hobbies, collectibles and art

Major household applianceElectrical equipment

Entertainment excluding digital servicesEvents

Digital servicesHoliday and travel

An online website/app on my mobile/tablet

A store on the high street or in a town centreA store in a retail park A store in a shopping centre

50 41 5222

22

46 4835 39 14 7 4

34 35 20 5 632 25 14 21 7

30 24 15 25 626 28 25 12 825 24 21 21 9

19 17 21 35 818 9 30 39 418 20 34 14 1417 21 31 16 15

11 12 49 14 14

Most large ticket items tend to be bought online.In particular the leisure categories are more likely to be bought online than other categories while clothing, baby and beauty products are more likely to be purchased in a store.

25

Leisure26


UK consumer leisure spending in the last three months

Net % UK consumers spending more by category over the last three months

-20

-15

-10

-5

0

5

Q3 2019

Q2 2019

Q1 2019

Q4 2018

Q32018

Q2 2018

Q1 2018

Q4 2017

Q3 2017

Q2 2017

Q1 2017

Q4 2016

Q32016

Q22016

Q12016


Eating and drinking out In-home leisure HolidaysGym/playing sport Other big ticket experiences Betting and gaming

Leisure spending continues to rise.Net spending was up year on year in 9 out of 11 categories. While spending on holidays was slightly lower than in Q3 2018, spending on both small and big‑ticket experiences rose compared to the same period a year ago.

27


Leisure spending in the last three months by category




Long holidays 0 -10%


Short breaks 0 0-1%

Attending live sports events +2 +4-3%

Gym and sports +1 +1-3%

Betting and gaming +1 +2-6%

Other leisure -1 +3-8%

Eating out 0 +5-9%

In-home leisure -1 +5-9%

Culture and entertainment 0 +5-10%

Drinking in pubs and bars -1 +4-13%

Drinking in coffee houses and sandwich shops -3 +3-15%

28

Automotive29


UK car registrations

New car sales slow as consumers become cautious over major purchases.September saw moderate growth (+1.3 per cent year on year) against a particularly low volume month in 2018. However, the UK new car market fell by ‑2.5 per cent in the first three quarters of the year, according to figures from the Society of Motor Manufacturers and Traders (SMMT). Overall sales this year are lagging behind the rest of Europe and are actually at their lowest level since 2013 with UK consumers increasingly wary of making major purchases.

-25

-20

-15

-10

-5

0

5

10

15

20

25


UK car registrations % change year on year

Source: The Society of Motor Manufacturers and Traders (SMMT)

Sep

2010

Jan

2011

May

201

1Se

p 20

11Ja

n 20

12M

ay 2

012

Sep

2012

Jan

2013

May

201

3Se

p 20

13Ja

n 20

14M

ay 2

014

Sep

2014

Jan

2015

May

201

5Se

p 20

15Ja

n 20

16M

ay 2

016

Sep

2016

Jan

2017

May

201

7Se

p 20

17Ja

n 20

18M

ay 2

018

Sep

2018

Jan

2019

May

201

9Se

p 20

19

30


UK car registrations year to date

Consumer preferences and government legislation are changing the shape of the marketThe overall shape of the car market is changing with consumers increasingly switching from diesel to petrol and from hybrid to fully electric. The long term decline of diesel car sales means that problems are accelerating for manufacturers and their partners.

YTD 2019 YTD 2018 % changeMarket

share 2019Market

share 2018

Diesel 480,388 605,355 ‑20.6% 25.8% 31.7%

Petrol 1,217,577 1,186,277 2.6% 65.4% 62.1%

BEV 25,097 11,299 122.1% 1.3% 0.6%

PHEV 22,773 32,144 ‑29.2% 1.2% 1.7%

HEV 77,921 67,566 15.3% 4.2% 3.5%

MHEV diesel

19,490 1,857 949.5% 1.0% 0.1%

MHEV petrol

19,025 6,322 200.9% 1.0% 0.3%

Total 1,862,271 1,910,820 -2.5%

BEV – Battery Electric Vehicle; PHEV – Plug‑in Hybrid Electric Vehicle; HEV – Hybrid Electric Vehicle; MHEV – Mild Hybrid Electric Vehicle

Source:�The Society�of�Motor�Manufacturers�and�Traders�(SMMT)

31


Car purchase plans

Planned car purchases at their lowest level since the tracker began.The immediate prospects for the automotive industry are a concern, with less than 4 per cent of consumers planning to purchase a car in the next three months. There has been a steady decline in planned purchases over the last year as consumers show more caution over major purchases.

% of UK consumers planning to purchase a car in the next three months

0

1

2

3

4

5

6

7

8

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019



32


Affordability of car repayments

Keep the status quo (pay the same)

Upgrade your vehicle (pay more)

Downgrade your vehicle (pay less)

End lease


9%

Thinking about your current financial situation, if you were offered the chance to change the terms of your finance/lease plan of your car(s) with no penalty which of the following would apply to you?

% of consumers who own a car on finance

4%

4%

57%

Despite concerns over levels of debt, consumers are generally comfortable with the affordability of their car payments.After housing, car repayments are often the single biggest monthly expenditure a consumer will have. Personal contract purchases in particular have been under scrutiny with the Financial Conduct Authority (FCA) recommending a more responsible approach to affordability checks.According to our analysis, while the majority of consumers who own a car on finance are comfortable with the repayments they make (57 per cent), 13 per cent would be willing to downgrade their car or end their lease to reduce their monthly costs.

33

Outlook34


Outlook for consumer spending – essential vs discretionary spending

Consumers expect to spend less in discretionary categories in Q4 2019.The outlook for consumer spending suggests that consumers intend to spend more on essential categories and less on the more discretionary categories over the next three months.

Net % of UK consumers spending more by category over the next three months

-25

-20

-15

-10

-5

0

5

10


Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Essential Discretionary

35


Outlook for consumer spending – by category

Spending is expected to accelerate across key essential categories but also for the more discretionary categories such as restaurant and short break holidays.However, while the UK might have just averted a recession in the third quarter of 2019, and although consumers have been quite resilient since the EU referendum, a deterioration in the jobs market could see some contraction in consumer spending especially in the discretionary categories.

Net % UK consumers spending more by category over the next three months

-30 -25 -20 -15 -10 -5 0 5 10 15 20 25Restaurant and short break holidays

Clothing and footwear

Electrical equipment (e.g. PCs/laptop,television, mobile phone device, etc.)

Major household appliances (e.g. washing machine,fridge, cooker, vacuum cleaner, etc.)

Furniture and homeware

Alcoholic beverages and tobacco

Going out (e.g. cinema, theatre, concerts, etc.)

Landline/mobile phone, internet and cable/TV subscriptions

Education

Pensions and insurance

Health

Housing (e.g. rent, mortgage, maintenance)

Transport

Grocery shopping for food and non-alcoholic beverages

Utility bills (e.g. water, electricity, gas and other fuels)


Q2 2019Q3 2019 Q3 2018

Mor

e sp

endi

ng

Less

spe

ndin

g

36


Leisure spending in the next three months

Net % UK consumers spending more by category over the next three months

-20

-15

-10

-5

0

5

Q3 2019

Q2 2019

Q1 2019

Q4 2018

Q32018

Q2 2018

Q12018

Q42017

Q32017

Q2 2017

Q12017

Q4 2016

Q32016

Q2 2016

Q12016


Eating and drinking out In-home leisure HolidaysGym/playing sport Other big ticket experiences Betting and gaming

‘Tis the season to be jolly?Spending on leisure will continue to be on consumers’ agenda for the last quarter of 2019. The spending intention data for Q4 2019 is higher compared to the same period last year in almost all categories.However, leisure businesses need to keep a close eye on how the consumer fundamentals perform over the coming months, especially businesses in the habitual, small‑ticket leisure categories where spending can rapidly contract if consumers’ circumstances change.

37


Leisure spending in the next three months – by category





Long holidays -9 -1-9%

Short breaks -7 +2-8%

Attending live sports events -2 +2-6%

Gym and sports +1 +4-1%

Betting and gaming 0 +3-9%

Other leisure -3 -1-10%

Eating out -1 +7-12%

In-home leisure 0 +3-12%

Culture and entertainment -1 +4-9%

Drinking in pubs and bars -3 +3-13%

Drinking in coffee houses and sandwich shops -1 +3-15%

38


The last word

The Deloitte consumer confidence index fell to ‑9 per cent in Q3 2019, one point lower than in the previous quarter and two points lower compared to the same period a year ago. Confidence is now at a level last seen in Q4 2018 and below the Deloitte Consumer Tracker’s long‑running average.

Takeaway 1Six months after the UK was given an extension to delay its departure from the EU until 31 October, the uncertainty surrounding Brexit has persisted and appears to be weighing more heavily on consumers.Additional new data from our survey, indicates that over the last three months consumer confidence in the state of the UK economy was weak (‑55 per cent). By contrast, confidence levels among consumers who do not own a home improved, a sign that they might be benefiting from property price growth being the slowest in six years.

Takeaway 2Consumers appear more confident about their own personal finances than the state of the economy overall.Compared to a year ago consumer sentiment about personal finances improved while confidence in the job market deteriorated. Confidence in levels of debt increased by two percentage points on Q2 2019 and by three points compared to the same period a year ago. Meanwhile consumers’ confidence in their levels of disposable income was one point higher than it was a year ago (‑19 per cent).

Takeaway 3However, our data shows that confidence in job opportunities/career progression and job security have continued their downward trend this quarter.Despite unemployment at historical lows, it unexpectedly rose from a four‑decade low in the three months to August. Indeed, according to the Tracker, confidence in job opportunities/career progression fell by a significant five percentage points (to ‑6 per cent) compared to both the previous quarter and the same period a year ago. With the increasing number of job cuts being announced, and major companies going into administration or restructuring their operations, sentiment about job security was also hit and was three points lower (at ‑8 per cent) this quarter compared to Q3 2018.

Takeaway 4In a sign that people are continuing to favour experiences over goods, our leisure sector analysis shows that net spending was up year‑on‑year in 9 out of 11 leisure categories.Net spending in each category indicate that consumers have been reducing their net spending on groceries, utilities and transport an indication that lower inflation is easing cost pressures of essential items. As a result the leisure sector continued to performed well. Net spending was up year‑on‑year in 9 out of 11 leisure categories. While spending on holidays was slightly lower than in Q3 2018, spending on both small and big‑ticket experiences rose compared to the same period a year ago.

39


Ian StewartChief Economist, DeloitteUp to now we have seen a slowdown everywhere but in the jobs market and in the consumer economy.

The slowdown in consumer confidence this quarter combined with a fall in official unemployment figures show that the period of resilience in jobs and earnings is coming to an end. Indeed among businesses, perceptions of uncertainty are elevated and corporate risk appetite is low. The priority appears to be curbing costs, not expansion. With Brexit cited as the biggest risk, the last quarter has also seen heightened concern over slowing growth in the UK and Eurozone.

The headwinds from a major global slowdown and uncertainty at home point to weaker growth ahead. As a result 2020 is likely to see not only lower levels of consumer confidence but also see consumer spending growth continuing to slow.

Mike WoodwardAutomobile lead partnerUK consumers appear to be increasingly wary of making major purchases. The UK new car market declined ‑2.5 per cent in the first three quarters of the year and is now at its lowest level since 2013. Unfortunately, there is no sign of a quick fix, with less than 4 per cent of consumers planning to purchase a car in the next three months, the lowest level recorded since the Tracker began.

In addition to a fall in new car sales, there are a number of potential headwinds for the automotive industry. For example, the value of the pound against the euro has fallen by 12 per cent over the past three years. So far, the consumer has been shielded from price rises associated with currency fluctuation, but if the pound continues to fall, manufacturers may be forced to pass on the costs to consumers.

Simon OatenHospitality and Leisure lead partnerIn a sign that people are continuing to favour experiences over goods, our leisure sector analysis shows that net spending was up year‑on‑year in 9 out of 11 leisure categories. While spending on holidays was slightly lower than in Q3 2018, spending on both small and big‑ticket experiences rose compared to the same period a year ago.

However, consumers enter the fourth quarter in a relatively cautious mood and maybe for good reasons. While most of the UK economic fundamentals remain solid including the level of unemployment close to its historic low, there are already some signs of strain. The UK might have just averted a recession in the third quarter of 2019, and although consumers have been quite resilient since the EU referendum, a deterioration in the jobs market could see some contraction in consumer spending especially in the discretionary categories.

The last, last word

Ian GeddesRetail lead partnerThe second half of 2019 is being more challenging for many retailers. Consumers have held back from spending on larger discretionary items such as household goods until the Brexit uncertainty recedes. However, online continues to show strong growth, and some retailers still deliver a solid performance considering the structural challenges around cost and competition.

Retailers are now looking ahead to the business end of the year and will be planning for big retail events such as Black Friday and Christmas. While discounting and promotion strategies are important, there is also a real opportunity for retailers to attract new customers as well as retain loyal customers through continued investment in their online and in‑store experiences.

40


Contacts

Aino TanAuthor Manager,�Transportation,�Hospitality�and�Services�Research

[email protected] +44 20 7007 4406

Celine FenechAuthor Manager,�Consumer�Products�and�Retail�Research


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.

Ben PerkinsContributor Head�of�Consumer�Research

[email protected]+44 20 7007 2207

Dr Bryn WaltonAuthorManager,�Automotive�Research


41

mailto:cfenech%40deloitte.co.uk?subject=

mailto:beperkins%40deloitte.co.uk?subject=

The�Deloitte�Consumer�Tracker�is�based�on�a consumer�survey�carried�out�by�independent�market�research�agency,�YouGov,�on�Deloitte’s�behalf.

This�survey�was�conducted�online�with�a nationally�representative�sample�of�more�than�3,000 UK�adults aged�18+�between�27 and�30 September 2019.

This�document�is�confidential�and�it�is�not�to�be�copied�or�made�available�to�any�other�party.�Deloitte LLP�does�not�accept�any�liability�for�use�of�or�reliance�on�the�contents�of�this�document�by�any�person�save�by�the�intended�recipient(s)�to�the�extent�agreed�in�a Deloitte�LLP�engagement�contract.

If�this�document�contains�details�of�an�arrangement�that�could�result�in�a tax�or�National�Insurance�saving,�no�such�conditions�of�confidentiality�apply�to�the�details�of�that�arrangement�(for�example,�for�the�purpose�of�discussion�with�tax�authorities).

Deloitte�LLP�is�a�limited�liability�partnership�registered�in�England�and�Wales�with�registered�number�OC303675�and�its�registered�office�at�1�New�Street�Square,�London�EC4A�3HQ,�United�Kingdom.

Deloitte�LLP�is�the�United�Kingdom�affiliate�of�Deloitte�NSE�LLP,�a�member�firm�of�Deloitte�Touche�Tohmatsu�Limited,�a�UK�private�company�limited�by�guarantee�(“DTTL”).�DTTL�and�each�of�its�member�firms�are�legally�separate�and�independent�entities.�DTTL�and�Deloitte�NSE�LLP�do�not�provide�services�to�clients.�Please�see�www.deloitte.com/about�to�learn�more�about�our�global�network�of�member�firms.

©�2019�Deloitte�LLP.�All�rights�reserved.

Designed�and�produced�by�368�at�Deloitte.�J18855

Documents

Signs of a consumer slowdown The Deloitte Consumer Tracker · 2020-07-27 · The Deloitte Consumer Tracker Q3 2019 Deloitte consumer confidence index Net % of consumers who said their