Consumer confidence in the UK saw moderate year-on-year growth of 0.5% in the final quarter of 2019, signalling a more optimistic mood for 2020, according to research by Deloitte.
With political uncertainty lifting, it appears that consumer sentiment on the state of the economy, job security and personal finances is too. However, retail spending is expected to remain subdued until these factors gradually translate into improved sales.
Deloitte’s latest Consumer Tracker analysis, based on responses from more than 3,000 UK consumers between 3 and 7 January 2020, revealed sentiment on the state of the economy grew significantly compared to the previous quarter, rising 27 percentage points.
Despite year-on-year confidence around career progression and job opportunities falling three percentage points (to -6%), job security sentiment has risen three percentage points (to -5%) on both the last quarter and compared to the same period last year. This corresponds with businesses being more optimistic about hiring intentions over the next 12 months, a measure that reached a four-year high in Q4 2019, according to the latest Deloitte CFO Survey.
Ian Stewart, chief economist at Deloitte, said: “Consumers enter the new decade with significantly improved confidence, though expectations of a slowdown in the employment rate and in real earnings growth could produce headwinds. However, if the reduced political uncertainty results in a strong rebound in corporate activity in 2020, such headwinds may not materialise.”
Tough trading conditions for retailers in the lead up to Christmas saw much earlier and heavier discounting than in previous years. Deloitte’s data revealed average discounts reached 47% by Christmas Eve, and 52.8% on Christmas day itself; 0.7% deeper than last Christmas. However, strong economic fundamentals of low unemployment, low inflation and real wage growth have enabled consumers to have greater disposable spending power, with discretionary spending moving into positive territory for the first time since the Deloitte Consumer Tracker began in 2011.
Ben Perkins, head of consumer research, commented: “While consumers appear much more optimistic about their own personal finances, this has yet to be reflected in consumer spending. Online continues to show strong growth, but retailers across the board are looking to attract new customers as well as retain their loyal base in 2020. Opportunities are likely to be found through continued investment in both online and in-store experiences.”
