UK consumer confidence rises to highest level in a year – but there’s a big split
PwC’s latest Consumer Sentiment Survey shows consumers are feeling more confident this summer after dropping three times in the past year.
However, this improvement was concentrated in two segments of the population – the 25 to 34-year-olds and those in the highest socio-economic group – reflecting a divergence between other demographic groups. Meanwhile, the findings also show that consumers across the board remain concerned about inflation and their job security.
The survey, a key indicator of consumers’ spending intentions in the year ahead, recorded an index score of -5, the highest in a year and better than the long-run average, albeit below last July (-4), directly after the last General Election.
While sentiment improved slightly across all demographic groups in the last quarter, 25 to 34-year-olds (+13) and ABs (+10) are the only groups that are more optimistic compared to this time last year.
One of the reasons both groups are feeling more buoyant is the findings show they are the only groups that have seen household finances improve in the last 12 months. Elsewhere, all the other groups surveyed are on average worse off compared to a year ago.
Key concerns
PwC’s latest survey shows economic concerns remain widespread amongst consumers – with 84% saying that the ‘rising cost of everyday things’ remains a worry, with the other top concern being the UK economy (86%). Job security and job progression was a concern for 39% of respondents, up from 36% at the start of the year.
While this is one of the lowest concerns for the population as a whole, this has become a more pressing worry amongst younger people, with 60% of 18 to 24-year-olds and 66% of 25 to 34-year-olds expressing their unease about prospects, up from 49% and 57% respectively at the start of the year.
Overall, consumer spending intentions have softened slightly across most categories in the survey since the spring, although across the board, grocery spending remains an exception with 46% saying they intend to spend more on this in the next 12 months (and only 14% saying they will spend less), partly driven by expectations of higher prices.
Non-discretionary categories of children and pets remain the next most important priority for consumers, followed by holidays with 21% saying they intend to spend more on trips in the next 12 months. For over 65s, holidays are the highest priority spending category after groceries and pets.
By comparison, under 35s prioritise spending on more typically discretionary spending categories such as fashion, health, wellbeing and beauty, with more young people planning to increase spending in these categories than decrease.
“While sentiment has improved since the spring and stopped declining, the contrast of those feeling the most and least optimistic is split demographically with the majority of the population – while slightly more upbeat that earlier this year – still feeling worse off compared to this time last year,” said Sam Waller (Leader of Industry for Consumer Markets at PwC).
“Businesses in the consumer industry will need to be agile and pivot their offerings to target to their more confident customers given the current economic backdrop and how hesitant some consumers are about discretionary spending,” he said.
