Consumers Show Resilience In The Aftermath Of The EU Referendum

Consumer confidence remained unchanged in the days that immediately followed the EU Referendum, according to the Q2 2016 Consumer Tracker from Deloitte.

The survey of 3,000 consumers, which was carried out between the 24th and 27th June, found that its headline measure of consumer confidence remained flat from the previous quarter, at -8. However, despite overall confidence remaining stable, consumers did appear to be concerned about job security in the future.

According to the Tracker, consumer confidence in job security fell by three points in Q2 from the previous quarter, and by six points compared to the same period last year. For those aged 18-34, confidence in job security fell by seven points, and is now at its lowest level since Q1 2012.

Ian Stewart, chief economist at Deloitte, said: “We surveyed UK consumers in the three days after the Referendum, against a backdrop of the resignation of the Prime Minister and a sell-off in UK equities and the pound. Despite the turmoil, confidence among our sample of 3,000 adults was, remarkably, unchanged from March. This resilience contrasts with the plunge in business confidence recorded in our post-Referendum CFO survey.

“Although the initial shock of the vote has receded, the outlook for growth has dimmed. UK activity is set to soften in the next year and the government faces an unparalleled task in shaping a post-EU settlement. The complexity, scale and importance of the negotiations that will take the UK out of the EU mean that uncertainty is here to stay. But, by providing a compelling vision of the UK’s long term economic future, the government can provide important reassurance to consumers and business.

“Consumer spending is the engine of UK growth, accounting for about two thirds of activity. Maintaining consumer confidence, and spending, will be crucial to keeping the economy growing as the process of exiting the EU gets underway”.

The Tracker also found that consumer spending in Q2 2016 remained largely stable. As has been the case in recent quarters, consumers appear to be shifting their spending towards non-essential, discretionary items and away from everyday essentials. Net spending on both big and small ticket discretionary items rose compared to the previous quarter.

In addition, leisure spending continues to grow at a faster rate than retail spending, as consumers prioritise spending on experiences, such as eating out and entertainment.

Ben Perkins, head of consumer research at Deloitte, commented: “Consumer spending has shored up well in the last three months, with spending having risen in almost every category year-on-year.

“It appears this healthy level of spending looks set to continue over the next three months. UK consumers plan to spend more on leisure activities, such as holidays and going out, as well as groceries and big ticket items such as furniture and appliances. They expect to spend less on clothing and footwear.

“It remains to be seen what impact political and economic uncertainty will have on the consumer market. However, a silver lining lies in the fact that consumer-focused economic fundamentals remain favourable, with inflation, unemployment and the cost of borrowing still all low.”