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28 April 2017 | ITSM
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Consumer Confidence Softens Amid Rising Cost Pressures
UK consumer confidence fell by one percentage point in the first quarter of 2017, according to the latest Consumer Tracker report from Deloitte...

The quarterly survey of 3,000 UK consumers carried out between 17 March and 20 March 2017, saw overall consumer confidence fall to -7% in Q1 2017, down one percentage point from the previous quarter. Despite the quarterly fall in overall confidence, it remains broadly in line with the three-year average.

Significantly, four out of the six measures which make up the confidence index have seen negative movements in Q1 2017, with inflation rising and discretionary spending falling. In particular, consumer confidence in disposable income fell by three percentage points to -17% this quarter, its lowest level in more than two years.

Ian Stewart, chief economist at Deloitte, said: “Since last summer’s EU referendum consumer spending has held up well, but with inflation rising and nominal wage growth starting to slow, consumers are beginning to feel a squeeze on their disposable income.

“In March, the rate of inflation stood at 2.3%, above the Bank of England’s 2% target and the highest in more than two years. There are already some signs that these pressures are contributing to a slowdown in consumer activity.

“Record levels of employment and low interest rates should help the UK avoid a sharp drop in consumer spending.”

The Q1 Consumer Tracker also revealed signs of a slowdown in consumer spending. Essentials spending remained strong, at 12%, after a significant increase in Q4 2016. However, spending on discretionary items returned to negative territory, falling by four percentage points to -4% in Q1 2017.

Ben Perkins, head of consumer research at Deloitte, commented: “With less disposable income consumers will have to consider whether to trade down, buy less or borrow more. Consumers are already showing signs of moving away from making major purchases, and this is a trend that is likely to continue.

“Consumers have already been tapping into their savings with the latest data on the household savings ratio for Q4 2016 showing it is at its lowest level in over 50 years. However, with interest rates remaining low, debt has been relatively cheap to manage meaning borrowing more might still be an option.

“Retailers and other consumer businesses will need to think carefully about their offerings to ensure they are targeting the right products and services to the right customers. Indeed, rather than catering for all needs and desires, now it is the time for retailers to focus on specialisation, differentiation and innovation, in order to ensure they remain as competitive as possible.”

For additional information or to view the “Deloitte Q1 Consumer Tracker” click on the link  https://goo.gl/y5vi8c.

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