The latest Deloitte Consumer Tracker reveals consumer confidence in Wales improved by three percentage points in Q2 2023; with an eight percentage point increase since the beginning of 2023.
Despite the increase in overall confidence, sentiment towards the state of the economy fell by eight percentage points and in the last three months consumer sentiment in job security fell sharply by eight percentage points. Conversely, Welsh consumer confidence around household disposable income rose steeply by 18 percentage points.
Phil Lane, financial advisory partner and consumer business lead at Deloitte in Wales, said:
“It’s positive that we can report another rise in consumer confidence in Wales for the second quarter of the year. The major rise was in household disposal income driven by Welsh consumers seeing an increase in their income. This category took the biggest fall last quarter.
“The Tracker shows consumer spending fell very slightly compared with last quarter. Consumers in Wales are spending less on essential items, especially utility bills which remain a concern for householders. However, consumers in the nation did spend more on discretionary items particularly clothing and footwear which could be due to the good weather we enjoyed earlier in the year, before the start of the school holidays.
“In Wales, consumers have indicated they will be spending less again next quarter on essential and discretionary items – this is in contrast to national sentiment of increased consumer spending for the next three months. Recessionary behaviour is resulting in savvier shopping – consumers are looking for the best deal.”
Budget shopping to be a ‘lasting legacy’ of the cost-of-living crisis, according to latest Deloitte Consumer Tracker
Shoppers moving away from mid-market brands to more budget-friendly options could become a permanent trend, according to the latest Deloitte Consumer Tracker.
The research, based on a survey of 3,387 UK adults between 16th and 22nd June 2023, found consumer confidence in Q2 2023 improved for a third-consecutive quarter, rising by one percentage point. Confidence levels however remain below the long-term average, indicating that consumer finances are still under pressure.
Despite inflationary pressures easing, prices remain high and as a result consumers intend to continue adapting their shopping behaviours after an extended squeeze on their finances. In a sign that high energy bills remain an ongoing concern for UK households, as many as 44% of consumers are still actively trying to decrease their home energy consumption.
Céline Fenech, consumer insight lead at Deloitte, said:
“A combination of five bank holidays, nationwide celebrations for the King’s Coronation and the hottest June on record may have encouraged some people to loosen the purse strings. However, the proportion of consumers adopting coping strategies to manage the rise in the cost-of-living has remained relatively consistent quarter-on-quarter.”
A third (31%) of UK consumers said they will buy supermarket own-brand goods over the next three months. Nearly the same amount (29%) plan to shop at cheaper supermarkets. Consumers are also looking to retailers for help in managing costs, with 29% of respondents hoping to take advantage of discounts and promotions, and 27% planning to use loyalty schemes more (up from 24% last quarter).
Fenech added:
“This behaviour, which is seeing consumers migrate away from mid-market shops and brands, could potentially become a permanent feature and lasting legacy of the cost-of-living crisis.
“Our results show that around a third of consumers are looking to save money by consuming less, switching to cheaper products or by actively looking for promotions and sales.
“Retailers are having to regain the trust of their consumers, offer more transparency on prices and prove the value of their products.”
Consumer confidence in the UK economy falls
Consumer sentiment towards the UK economy decreased -11 percentage points in Q2 2023. Sentiment in job security also saw a one percentage point fall compared with the previous quarter.
Ian Stewart, chief economist at Deloitte, commented:
“The good news in terms of low unemployment and better wage growth is translating into bad news in the form of higher mortgage rates.
“With housing the number one cost for many consumers, higher mortgage costs will act as an increasing drag on consumer spending activity through the rest of this year and into 2024. The big hope is that inflation will fall away sharply, as this will help support real incomes and counter the impact of the mortgage squeeze.”
Demand for travel and leisure remains strong, as consumers save for holidays
The Deloitte Consumer Tracker saw net spending in the leisure sector improve from -12.8% in Q1 2023 to -11.0% in Q2 2023. The most notable increase was in the long and short holiday categories, with a seven and six percentage point increase, respectively in Q2.
The upward trend points to consumers relaxing their recessionary behaviours due to a combination of salary increases, warmer weather, and pent-up demand for travel.
Andreas Scriven, partner and head of hospitality and leisure at Deloitte, commented:
“Even with higher ticket prices, UK consumers seem to be prioritising spending on holidays above other discretionary expenses, particularly after years of pandemic travel restrictions, which has supported a recovery in the travel sector.
“The all-inclusive package holiday has remained a resilient and popular product, despite the pressure on disposable incomes from inflation and rising interest rates.”
While there is an uplift in travel, Deloitte’s research found that leisure and hospitality has also been more exposed to high inflation given that it is energy, food and people intensive, relying heavily on consumer demand.
“Many travel and hospitality businesses have increased prices to offset rising costs and protect profit margins. To cope, some businesses have been shrinking their offering by cutting down menu sizes, demanding deposits or even pre-payment for a meal, and making other savings wherever possible. In the medium term, the hospitality sector will have to manage high input costs – all the while wondering if robust consumer demand can continue to hold when disposable incomes are squeezed.”
