KPMG’s latest quarterly Consumer Pulse study shows that many consumers are still cutting back on non-essential spending and making changes to their shopping habits to save money.
A survey found that four in ten consumers made cuts back in the last quarter, reducing their monthly discretionary budget by £77 on average compared to the start of the year.
As the country heads into the final weeks before the general election, the scale of essential cost pressures has even seen 5% of consumers reporting that they have reduced their monthly non-essential spending by over £200 compared to when 2024 began. On average, those aged 25 to 34 were found to have made the highest monthly cut to their discretionary spending.
KPMG’s research also shows the divide that household cost pressures are having on consumer confidence. A quarter of consumers said they feel less secure about their financial circumstances than when the year began, but a quarter feel more secure.
“Our research clearly indicates that many households have had to continue to find ways to cut non-essential spend so far this year, with some making sizeable cuts as they adapt to or prepare for significant cost hikes, such as a remortgage or rent increase,” commented Linda Ellett, UK Head of Consumer, Retail and Leisure for KPMG.
“Slowing inflation does not mean that consumers are seeing a reduction in prices and costs, and the overall squeeze on many monthly budgets continues. Consumers are cutting back spend through seeking out cheaper brands or promotional offers, buying fewer items, and by restricting the everyday treats such as eating out.”
Eating out (67%), clothing (59%), and takeaway food (56%) were found to be the three most common cost-cutting targets for those reducing non-essential spend. A third have reduced spend on beauty products, while a quarter are cutting back on TV or music streaming services.
When asked about what steps they were taking when shopping to save money, 32% of consumers said they are buying more promotional / discount produce and 31% are buying fewer items.
Meanwhile, 31% revealed that they are buying more own label / value goods, 30% are using loyalty schemes more, and 27% are buying more lower price branded goods.
A quarter are shopping more at lower-cost retailers, and a fifth said they had switched brands on frozen foods, fresh produce, and clothing. One in ten reported switching their insurance, mobile phone, or broadband provider.
Looking ahead to the rest of the year, 22% of consumers said they expected to feel more financially secure, while 19% said they would feel less so.
Ellett concluded: “As we head toward the election, many households are still adapting to higher costs, consumer confidence and feeling of financial security are clearly divided, and there remains limited appetite to make major purchases. This is the landscape facing the next government as they develop their future economic policy.”
NAM Implications:
- The key is the fact that shoppers may become accustomed (or even loyal) to own-label…
- (possibly experiencing little difference to brands in the process)
- …and will therefore be increasingly difficult to win back to branded equivalents.
- Hopefully retail media will come to the rescue…
