1. society
2. work
3. unemployment

Q3 2014
The Deloitte Consumer Tracker
Confidence hits three-year high
The latest Deloitte Consumer Tracker shows
that consumer confidence rose for the third
quarter in succession in Q3 2014, reaching a
three-year high and taking another step closer
to positive territory.
The headline measure of confidence is now
three points higher than a year ago, and
13 points higher than when the survey began
in Q3 2011.
There were year-on-year increases across five of
our six measures of confidence.
Consumers’ confidence regarding their
disposable income rose by seven points, while
confidence in their levels of debt climbed by
five points and confidence in job progression
increased by six points from a year ago. In
addition a decline in the number of consumers
reporting a reduction or loss of income is a
further sign of an improving labour market.
Deflation in the food market, driven by
increasing competition and lower commodity
prices, has allowed consumers to cut back
their spending on essentials. This has created
more scope for spending in discretionary areas
such as holidays, eating out and furniture. In
fact, net spending on holidays in the last three
months moved into positive territory for the
first time since the survey began.
Looking ahead to 2015, consumers appear in
positive mood as they expect the value of their
properties to continue to rise and their levels of
debt to be lower.
Consumers also expect competition in the
grocery market to continue, with fewer
anticipating price rises in the supermarket or
their spending on food and drink to increase.
While our tracker portrays a more upbeat
consumer two concerns remain: the prospect
of higher interest rates as well as higher taxes.
Confidence continues to rise, even in the
absence of income growth. Lower oil prices,
falling consumer price inflation and a strong
pound have all helped ease the pressure on
consumers’ disposable incomes. While average
earnings growth remains below the rate of
inflation, the gap has narrowed.
Chart 1. Deloitte Consumer Confidence
Net % of UK consumers who said that their level of confidence has improved over the past three months
0%
-5%
-10%
-15%
-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
Note: This measure is an average of the six measures of consumer confidence tracked by the Deloitte
Consumer Tracker
Deloitte Insight
Key
Indicators
Previous
Latest
-6%
-5%
Overall consumer confidence (q/q)*
-18%
-18%
Confidence in level of
disposable income (q/q)*
+11%
+8%
Essentials spending (y/y)*
-12%
-6%
Discretionary spending (y/y)*
+3.3%
+3.8%
ONS retail sales value growth
Aug‑14 (y/y)
+2.7%
+1.5%
CPI inflation Aug-14 (y/y)
* Net balances
Authors
Ben Perkins
Head of Research
Consumer Business
020 7307 2207
[email protected]
Céline Fenech
Research Manager
Consumer Business
020 7303 2064
[email protected]
Aino Pietikainen
Research Manager
Consumer Business
020 7007 4406
[email protected]
2 | The Deloitte Consumer Tracker Q3 2014 Confidence hits three-year high
Consumer confidence
Confidence climbs higher
Year-on-year increases across five
of our six measures of confidence
helped drive Deloitte’s headline
rate to a record high. Sentiment
about disposable income saw
the largest year-on-year increase,
up seven percentage points.
Consumers also appear more
confident about their career
progression, which rose by
five points this quarter and job
security, up one point. They were
also more confident about their
levels of debt with sentiment
climbing five points higher.
Chart 2. UK consumer sentiment about personal situation
Net % of UK consumers who said that their level of confidence has improved over the past
three months, year on year
10%
2% 3%
0%
-1%
-3%
-4%
-5%
-7%
-8% -6%
-10%
-10%
-12% -9%
-15%
-13%
-16%
-18%
-10%
-20%
-16%
-25%
-30%
-33%
-40%
-43%
-50%
Your household Your general
disposable
health and
income
wellbeing
Q3 2011
This improving consumer outlook
fits well with the findings of the
latest Deloitte UK survey of Chief
Financial Officers which shows
that risk appetite among CFOs
at UK corporates has reached
a seven-year high. At the same
time, CFOs’ expectations for
revenues and margins remain
close to their four-year high.
0%
-6%
-10%
Q3 2012
Your job
security
Your level
of debt
Q3 2013
Q3 2014
Your children's Your job
progression/
education
career
and welfare
progression
Chart 3. Risk appetite
% of CFOs who think this is a good time to take a greater risk onto their balance sheets
80%
60%
40%
20%
0%
2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014
Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
Source: Deloitte CFO Survey Q3 2014
The strong property market
is also boosting consumer
confidence on disposable
income. Among home owners
confidence has continued to rise
at a faster rate than among
non-home owners.
Chart 4. Deloitte Consumer Confidence on disposable income by home ownership
Net % of UK consumers who said that their level of confidence has improved over the past
three months
0%
Q3 2011
Q3 2012
Q3 2013
Q3 2014
-10%
-13%
-20%
-25%
-30%
-31%
-32%
-37%
-40%
-43%
-44%
-50%
Home owners
-25%
Non-home owners
The Deloitte Consumer Tracker Q3 2014 Confidence hits three-year high | 3
Consumer confidence
Strong job market boosts confidence
Fewer consumers suffered a
reduction or loss of income in
Q3 2014 than a year earlier,
continuing the downward trend.
This is another sign that there is
less pressure in the labour market.
Chart 5. Changes in household circumstances
Net % of UK consumers that said they had experienced a reduction/loss of income
20%
19%
18%
16%
14%
14%
12%
12%
11%
10%
8%
6%
4%
2%
0%
The latest official data from the
Office for National Statistics
confirms this view, with UK
unemployment at its lowest
level since November 2008 in
June 2014, as the job market
continues to strengthen.
Q3 2011
Q3 2012
Q3 2013
Q3 2014
Chart 6. Unemployment rate
UK LFS: Unemployment rate, all, aged 16 & over SADJ
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
1/6/04 1/6/05 1/6/06 1/6/07 1/6/08 1/6/09 1/6/10 1/6/11 1/6/12 1/6/13 1/6/14
Source: ONS
Moreover, growth in private
sector hiring continues to more
than offset declines in
public sector employment.
Chart 7. UK private and public sector job growth (thousands)
Number of jobs added/lost each quarter, private sector vs public sector
500
400
300
200
100
0
-100
-200
-300
Q3
2004
Q3
2005
Public
Q3
2006
Q3
2007
Q3
2008
Private
Source: Thompson Reuters Datastream
Q3
2009
Q3
2010
Q3
2011
Q3
2012
Q3
2013
Q2
2014
4 | The Deloitte Consumer Tracker Q3 2014 Confidence hits three-year high
Consumer spending
Consumer demand remains robust
Demand remains robust,
with consumer spending up
by 2.1 per cent in the first
quarter of 2014. While the
average annual rate of growth
remains below the average for
the decade preceding 2007,
absolute levels of consumer
spending are now back to the
2007 levels at £1.02trillion.
Chart 8. Consumer expenditure, constant prices, seasonally adjusted – % change y-on-y
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
Q2
2004
Q2
2005
Q2
2006
Q2
2007
Q2
2008
Q2
2009
Q2
2010
Q2
2011
Q2
2012
Q2
2013
Q2
2014
Source: ONS
Chart 9. Category spending over the past three months
Net % of UK consumers spending more by category
20%
Increase
15%
10%
Decrease
Consumer spending on essential
items continues to decline this
quarter, allowing consumers to
switch more of their spending
to discretionary categories.
Spending on big ticket items
such as major household
appliances and furniture
continues to rise, benefiting
from the strength of the housing
market and rising consumer
confidence.
-5%
5%
0%
-10%
-15%
-20%
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014
Essentials
In fact net spending on holidays
moved into positive territory for the
first time since the survey began in
Q3 2011, a sign of the strength of
the travel market during the first
three quarters of 2014.
Big-ticket items
Chart 10. Category spending over the past three months
Net % of UK consumers spending more by category over the past three months
40%
Increase
40%
31%
28%
30%
23%
21%22%
21%
20%
20%
15%
14%
15%
10%
10%
4%
0%
Decrease
Net spending across a range of
discretionary categories increased
this quarter on a year-on-year
basis. The restaurant and short
breaks category saw the highest
rate of growth, up ten percentage
points, followed by furniture and
homewares, holidays and clothing
and footwear, all up eight points
year on year.
Small-ticket items
-6%
-10%
-20%
-30%
-14%
-14%
-16%
-20% -19%
-24%
-31%
Going
out
-3%
-4%
-4%
-5% -5%
-5%
-9%
-10%
-10%
-11%
-12% -12%
-11%
-13%
-12%
-13%
-15%
-15%
-14% -13%
-16%
-18%
-25%
Furniture Restaurants Alcoholic Electrical Clothing Major
and
and short beverages equipment and
household
homeware breaks and tobacco
footwear appliances
Q3 2011
Q3 2012
Q3 2013
Q3 2014
Holidays
Transport Groceries Utility bills
(food and
non-alcoholic
beverages)
The Deloitte Consumer Tracker Q3 2014 Confidence hits three-year high | 5
Consumer spending
Confidence rises in the absence of wage growth
Robust consumer demand and
improving consumer confidence
are both supporting growth
in the retail sector. Specialist
retailers in discretionary
categories such as clothing
and footwear continue to
outperform food retailers,
moreover, our data shows
that growth in spending on
essentials has started to decline.
Chart 11. UK retail sales, volume and value (including fuel) seasonally adjusted –
annual % change
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
Aug
2004
Aug
2005
Aug
2006
Aug
2007
Aug
2008
Volume (including automotive fuel)
Aug
2009
Aug
2010
Aug
2011
Aug
2012
Aug
2013
Aug
2014
Value (including automotive fuel)
Source: ONS
Growth in average earnings
continues to track below
inflation. However, the latest
data (July 2014) showed that
the gap has narrowed, as the
rate of inflation declined to
its lowest level since October
2009.
Chart 12. Average earnings growth and UK national inflation
8%
6%
4%
2%
0%
-2%
Au
g
No 2004
v
Ma 2004
r
Au 2005
g
No 2005
v
Ma 2005
r
Au 2006
g
No 2006
v
Ma 2006
r2
Jul 007
2
No 007
v
Ma 2007
r
Au 2008
g
No 2008
v
Ma 2008
r
Au 2009
g
No 2009
v
Ma 2009
r
Au 2010
g2
No 010
v
Ma 2010
r
Au 2011
g2
No 011
v
Ma 2011
r
Au 2012
g
No 2012
v
Ma 2012
r
Au 2013
g
No 2013
v
Ma 2013
r
Au 2014
g2
01
4
-4%
Average earnings including bonuses
UK Inflation (CPI)
Source: ONS
An increase in unsecured
lending has helped boost the
consumer sector in the absence
of real wage growth, but
other factors such as declining
inflation, lower oil prices and
a generally strong pound
have also helped mitigate the
situation.
Chart 13. Consumer credit
Net unsecured and secured lending to individuals (% y-o-y)
15%
10%
5%
0%
-5%
July
2004
July
2005
July
2006
July
2007
July
2008
July
2009
Net secured lending to individuals (dwellings)
Source: Bank of England (BoE)
July
2010
July
2011
July
2012
July
2013
July
2014
Net unsecured lending to individuals
6 | The Deloitte Consumer Tracker Q3 2014 Confidence hits three-year high
Consumer spending
Factors supporting growth
A declining inflation rate
has helped ease pressure
on consumers’ finances. In
the food sector, the rate has
moved into negative territory
as falling commodity prices
and competition in the retail
market have contributed to
price deflation for food and
non-alcoholic beverages.
Chart 14. Inflation (CPI) for major retail categories
Monthly change in year-on-year prices
5%
4%
3%
2%
1%
0%
-1%
-2%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug
2013
2014
Food and Non-alcoholic beverages
Clothing and footwear
Total
Source: ONS
A strong pound has also
supported consumer spending
by exerting downward pressure
on the price of imported goods.
Chart 15. UK pound versus euro
1.30
1.25
1.20
1.15
1.10
1.05
1.00
Sep 09
Sep 10
Sep 11
Sep 12
Sep 13
Sep 14
Source: Thomson Datastream
During 2014, a drop in the
price of oil, and therefore fuel
prices, has also made it easier
for consumers to switch some
of their spending away from
essentials and towards more
discretionary items.
Chart 16. Prices for Brent Crude, Monthly % change in price per barrel
% change monthly
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
Oct 2009
Oct 2010
Source: Thomson Datastream
Oct 2011
Oct 2012
Oct 2013
Oct 2014
The Deloitte Consumer Tracker Q3 2014 Confidence hits three-year high | 7
Outlook
Consumers optimistic on prospects for 2015
In Q4 2014 consumers plan to
spend more on discretionary
categories than a year ago.
Consumers also plan to
spend less on essentials such
as transport, utility bills and
grocery shopping.
Chart 17. Category spending over the next three months
Net % of UK consumers spending more by category
35%
30%
30%
25%
20%
20%
12%
15%
10%
5% 5%
5%
5%
0%
-2%
7%
3%
-1%
-5%
-8%
-10%
-11%
-11%
-12% -12%-11%
-12%
-12%
-14%
-14%
-14% -15%
-15%
-15% -15%
-15%
-13%
-20%
Going
out
Clothing
Major
Electrical Alcoholic Furniture Restaurants
and
household equipment beverages
and
and short
footwear appliances
and
homeware breaks
tobacco
Q3 2013
As we enter the final quarter
of the year, consumers appear
to be planning cautiously for
Christmas. The use of vouchers
is expected to increase while
consumers also expect to
buy more items during
pre-Christmas sales.
Landline/ Holidays
mobile
(long
phone,
break)
Internet
and TV
subscriptions
Q3 2014
Chart 18. Plans for spending and shopping over Christmas 2014
Thinking now ahead to Christmas and the festive seasons 2014, how do you expect your
household spending and shopping habits to be different compared to a year ago?
Your use of discount vouchers/coupons
15%
Buying items on sale before Christmas
11%
Buying items on sale after Christmas
0%
Using your savings to pay for Christmas
-4%
-6%
Taking up a loan to pay for Christmas
Your spending on food and drink
for consumption at home
Your overall spending on Christmas
Your spending on credit cards
Looking ahead to 2015,
consumers are in optimistic
mood as they anticipate that
their debt levels will fall while
the value of their properties will
rise. Fewer consumers expect to
spend more on food or grocery
prices to rise. However, two
areas of concern remain: the
prospect of higher interest rates
as well as higher taxes.
Housing Transport Groceries
Utility
(food and
bills
non-alcoholic
beverages)
-6%
-11%
-11%
Your spending on gifts
-14%
Your spending on going out (e.g. socialising,
eating and drinking out)
-14%
Chart 19. UK consumers’ expectations for 2015
Now thinking about 2015... What, if anything, do you think will change compared to 2014?
Net % of UK consumers expecting an increase
80%
70%
60%
50%
76%
71%
57%
56%
54%
47%
41%
40%
30%
20%
22%
22%
10%
31%
24%
36%
35%
32% 34%
26%
27%
24%
24%
22%
8%
5%
1% 1%
-1%
0%
26%
23%
21%
-1%
-4%
The UK
The value
Your housing
Your
-6%
-7%
interest rates
of your
expenditure
spending
Your
-11%
-11%
property The taxes on grocery Your
e.g. rent,
Your
Your
Prices of
savings/
-13%-13%
you
pay
e.g.
mortgage,
spending
on
spending
income
shopping
goods in
investments
Your
-20% supermarkets
Your
income tax, for food
utilities e.g.
on maintenance, before
spending level
VAT, etc.
etc.
gas, electricity,
transport
tax
and
on non- of debt
water
e.g. wages,
non-alcoholic
essential
overtime,
beverages
categories
bonus
e.g. holidays,
going out, etc.
-10%
Q3 2014
Q3 2013
Q3 2012
8 | The Deloitte Consumer Tracker Q3 2014 Confidence hits three-year high
Contacts
Nigel Wixcey
Industry Leader, Consumer Business
020 7303 5007
[email protected]
Ian Geddes
Lead Partner, UK Retail
020 7303 6519
[email protected]
Graham Pickett
Lead Partner, UK Travel, Hospitality and Leisure
01293 761232
[email protected]
For current and past copies of the Deloitte Consumer Tracker please visit: www.deloitte.co.uk/consumertracker
About this research
The Deloitte Consumer Tracker is based on a consumer survey carried out by independent market research agency, YouGov, on our
behalf. This survey was conducted online with a nationally representative sample of over 3,000 UK adults aged 18+ between 19 and
21 September 2014.
A note on the methodology
Some of the figures in this research show the results in the form of a net balance. This means that in a survey of 100 participants,
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 per cent of consumers reported that they spent more rather than less.
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