Q4 2015
The Deloitte Consumer TrackerConsumers end 2015 in buoyant mood
Overall consumer confidence (q/q)*
* Net balances
Key Indicators
Confidence in level of disposable income (q/q)*
Essentials spending (y/y)*
Discretionary spending (y/y)*
ONS retail sales value growth Dec-15 (y/y)
CPI inflation Dec-15 (y/y)
LatestPrevious
-5% -7%
Previous Latest
-13% -11%
Previous Latest
+9% +5%
Previous Latest
-2% 0%
Previous Latest
+2.2% -0.3%
Previous Latest
+ 0.5% +0.2%
Deloitte’s latest Consumer Tracker shows that consumers ended 2015 in a buoyant mood, with consumer confidence rising again to produce the strongest fourth quarter reading since the Tracker began.
Consumer confidence rose by one percentage point year-on-year in Q4 2015, with improvements seen in three of the six key components in the index compared to the same time last year. One component – level of debt – stayed flat, while two declined.
Consumers reported feeling more confident about their job security, job opportunities and career progression, and household disposable income. The biggest improvement has been in confidence in household disposable income, which is the highest it has ever been.
Confidence edged lower in the fourth quarter. The main driver of this decline was a six percentage point fall in consumers’ general sense of health and wellbeing. Our data shows that this is an established seasonal effect that can be explained by consumers feeling less positive about their health following a period of excess in the run up to Christmas.
Consumers are spending less on essential items than they did last year, thanks, in part, to continued low inflation in key categories such as groceries and transport.
While lower commodity and consumer prices have put downward pressure on sales of grocery products, the supermarket sector had a better Christmas than many had expected. The big four grocers reported better results over the period than predicted as non-food categories performed particularly well.
While consumer confidence remains robust, retailers faced a difficult set of conditions over Christmas which was reflected in a mixed performance over the festive period. Spending rose in categories such as food and electrical appliances, but other categories suffered due to warm weather and heavy discounting, especially in clothing and footwear where sales fell by 5.3% as winter fashion lines proved hard to shift. Overall retail sales in December were down. Consumers were slow to get going over the rain-soaked Christmas period, and the poor weather helps to explain the strong performance of online as shoppers chose to stay at home and buy online instead of hitting the high street.
The leisure sector performed well with the wet weather in November and December having little effect on consumers appetite for eating and going out.
Overall, consumers are becoming less defensive. Cost-conscious, defensive spending behaviour is at the lowest level since the Tracker began. In particular, the Tracker shows consumers placing less emphasis on saving money by buying fewer items. This has coincided with a shift to more confident, expansionary behaviours, with consumers more willing to increase their volume of purchases.
The outlook for consumer activity in 2016 is positive with low inflation, low interest rates, rising wages and declining unemployment supporting consumer spending power. However, the consumer will have to navigate some significant uncertainties – not least the possibility of a referendum on EU membership taking place as early as June – that could rock the boat.
AuthorsBen PerkinsHead of ResearchConsumer Business020 7307 [email protected]
Aino TanResearch Manager Consumer Business020 7007 [email protected]
Rebecca ThomsonResearch ManagerConsumer Business020 7007 0891 [email protected]
Chart 1. Deloitte Consumer ConfidenceNet % of UK consumers who said their level of confidence has improved over the past three months
-20%
-16%
-12%
-8%
-4%
0%
Q42015
Q32015
Q22015
Q12015
Q42014
Q32014
Q22014
Q12014
Q42013
Q32013
Q22013
Q12013
Q42012
Q32012
Q22012
Q12012
Q42011
Q32011
Deloitte Insight
Three of the six key measures for the index rose compared to the same time last year. Consumers reported feeling more confident about their job security, job opportunities and career progression, and household disposable income.
Chart 2. UK consumer sentiment about personal situationNet % of consumers who said their level of confidence had improved in the past three months
Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015
-50%
-40%
-30%
-20%
-10%
0%
10%
Your householddisposable income
Your general health and wellbeing
Your jobsecurity
Your levelof debt
Your job opportunities/
career progression
Your children’seducation and
welfare
-39%
-33%
-27%
-18%
-11%
-15% -1
2%
-6%
-7%
-6%
-13%
-13%
-8% -6
% -5%
-10%
-15% -1
2%
-16%
-17%
-1%
-3% -1
%
+2%
0%
-13% -12% -1
0%
-4% -4%
Quarter-on-quarter the index has fallen, with confidence dropping two points compared to Q3 2015. This was largely driven by a six percentage point fall in consumers’ general sense of health and wellbeing, and represents a seasonal dip in line with previous years’ data as consumers adjust to post-Christmas levels of consumption and the January blues.
Chart 3. Consumer sentiment about general health and wellbeing
Net % of consumers who said their wellbeing has improved over the past three months
-18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
Q4 2015
Q3 2015
Q2 2015
Q1 2015
Q4 2014
Q3 2014
Q2 2014
Q1 2014
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2011
Q3 2011
The biggest improvement has been in confidence in household disposable income, which is the highest it has ever been. The measure has climbed 7 points compared to a year ago and is now at -11.
Chart 4. Consumer sentiment about household disposable income
Net % of UK consumers who said their level of confidence has improved over the past three months
-50%
-40%
-30%
-20%
-10%
0%
Q4 2015
Q3 2015
Q2 2015
Q1 2015
Q4 2014
Q3 2014
Q2 2014
Q1 2014
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2011
Q3 2011
Consumer confidenceStrongest January on record for consumer confidence
2 | The Deloitte Consumer Tracker Q4 2015 Consumers end 2015 in buoyant mood
Household disposable income has risen in the last year. This means consumers have more cash available for discretionary spending.
Chart 5. Household disposable income% change y-on-y UK household disposable income
Source: Office for National Statistics (ONS)
-4-3-2-1012345
Q3
2015
Q2
2015
Q1
2015
Q4
2014
Q3
2014
Q2
2014
Q1
2014
Q4
2013
Q3
2013
Q2
2013
Q1
2013
Q4
2012
Q3
2012
Q2
2012
Q1
2012
Q4
2011
Q3
2011
Q2
2011
Q1
2011
Q4
2010
Q3
2010
Q2
2010
Q1
2010
Q4
2009
Q3
2009
Q2
2009
Q1
2009
Q4
2008
Q3
2008
Q2
2008
Q1
2008
Q4
2007
Q3
2007
Q2
2007
Q1
2007
Q4
2006
Q3
2006
Q2
2006
Q1
2006
The proportion of consumers reporting redundancies and reduction or loss of income in their household has remained flat compared to a year ago.
Chart 6. Changes in household circumstancesPeople who said they had been laid off, experienced loss in income, or started a new job
0%
4%
8%
12%
16%
Q4
2015
Q3
2015
Q2
2015
Q1
2015
Q4
2014
Q3
2014
Q2
2014
Q1
2014
Q4
2013
Q3
2013
Q2
2013
Q1
2013
Q4
2012
Q3
2012
Q2
2012
Q1
2012
Q4
2011
Q3
2011
Being laid off/made redundant/lost job
Reduction/loss of some income (e.g. working reduced hours, etc.)
Falling unemployment has helped boost consumer confidence by improving job security and job opportunities.
Chart 7. Unemployment rateUK LFS: Unemployment rate, all aged 16 and over, seasonally adjusted
0%1%2%3%4%5%6%7%8%9%
Source: ONS
01/10/1501/10/1401/10/1301/10/1201/10/1101/10/1001/10/0901/10/0801/10/0701/10/06
Consumer confidenceDisposable income rises as unemployment falls
The Deloitte Consumer Tracker Q4 2015 Consumers end 2015 in buoyant mood | 3
The falling costs of essential items have enabled consumers to spend more on discretionary, big ticket items.
Chart 8. Category spending over the past three monthsNet % UK consumers spending more by category
-15%
-10%
-5%
0%
5%
10%
15%
20%
Essentials Small-ticket items Big-ticket items
Q4
2015
Q3
2015
Q2
2015
Q1
2015
Q4
2014
Q3
2014
Q2
2014
Q1
2014
Q4
2013
Q3
2013
Q2
2013
Q1
2013
Overall, consumer expenditure has risen as low inflation and low interest rates continue to help boost consumer spending power.
Chart 9. Consumer expenditure, constant prices, seasonally adjusted % change year-on-year
Source: ONS
-6%-5%-4%-3%-2%-1%0%1%2%3%4%5%
Q3
2015
Q2
2015
Q1
2015
Q4
2014
Q3
2014
Q2
2014
Q1
2014
Q4
2013
Q3
2013
Q2
2013
Q1
2013
Q4
2012
Q3
2012
Q2
2012
Q1
2012
Q4
2011
Q3
2011
Q2
2011
Q1
2011
Q4
2010
Q3
2010
Q2
2010
Q1
2010
Q4
2009
Q3
2009
Q2
2009
Q1
2009
Q4
2008
Q3
2008
Q2
2008
Q1
2008
Q4
2007
Q3
2007
Q2
2007
Q1
2007
Q4
2006
Q3
2006
Q2
2006
Q1
2006
Spending on discretionary categories such as furniture and homewares, going out and electrical appliances continue to improve year-on-year, but spending in categories such as holidays, eating out and short breaks are stagnating at a similar level to this time last year. -30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Chart 10. Category spending in the last three monthsNet % of UK consumers spending more by category
26%
-17% 15
%-9
%-4
%
-24% -2
1%
-11%
-7%
-3%
1% 0%
-9%
-1%
-1%
-18%
-1%
-15%
-1%
5% 5%
-11%
-12%
-7% -6%
-14%
-9% -8
% -4% -4%
-11%
-7%
-5
% -
3% -1%
-9%
Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015
Gro
cery
sho
ppin
g fo
rfo
od a
nd n
on-a
lcoh
olic
beve
rage
s
Alc
ohol
ic b
ever
ages
and
toba
cco
Clo
thin
g an
d fo
otw
ear
Hou
sing
(e.g
. ren
t,m
ortg
age,
mai
nten
ance
)
Uti
lity
bills
(e.g
. wat
er,
elec
tric
ity,
gas
and
othe
r fu
els)
Furn
itur
e an
d ho
mew
are
Maj
or h
ouse
hold
app
lianc
es(e
.g. w
ashi
ng m
achi
ne, f
ridg
e,co
oker
,vac
uum
cle
aner
, etc
.)
Land
line/
mob
ile p
hone
,In
tern
et a
nd c
able
/TV
subs
crip
tion
s
Elec
tric
al e
quip
men
t(e
.g. P
Cs/
lapt
op, t
elev
isio
n,m
obile
pho
ne d
evic
e, e
tc.)
Goi
ng o
ut (e
.g. c
inem
a,th
eatr
e, c
once
rts,
etc
.)
Res
taur
ants
and
hot
els
(eat
ing
out
and
shor
t br
eak)
Hol
iday
s (lo
ng b
reak
)
Pens
ions
and
insu
ranc
e
Educ
atio
n
Hea
lth
Tran
spor
t
0%2%
-2%
-4%
3%1% 1%1%
-1%
0% 2%0%
-1%
1% 1%
4%2%
4%
1%
4%8%
11%
9% 8% 8% 8% 10%
6%4%
30%
19%
25%
20%
-1%
0%
32%
23%
15%19
%
40% 44
%44
%22
%12
%
Consumer spendingSpending power continues to rise
4 | The Deloitte Consumer Tracker Q4 2015 Consumers end 2015 in buoyant mood
Retail sales declined in December 2015 as an unprecedented level of discounting took its toll.
Chart 11. Retail sales% change year-on-year
Source: ONS
Volume (including automotive fuel) Value (including automotive fuel)
-4%
-2%
0%
2%
4%
6%
8%
10%
01/1
1/15
01/0
9/15
01/0
7/15
01/0
5/15
01/0
3/15
01/0
1/15
01/1
1/14
01/0
9/14
01/0
7/14
01/0
5/14
01/0
3/14
01/0
1/14
01/1
1/13
01/0
9/13
01/0
7/13
01/0
5/13
01/0
3/13
01/0
1/13
01/1
1/12
01/0
9/12
01/0
7/12
01/0
5/12
01/0
3/12
01/0
1/12
01/1
1/11
01/0
9/11
01/0
7/11
01/0
5/11
01/0
3/11
01/0
1/11
01/1
1/10
01/0
9/10
01/0
7/10
01/0
5/10
01/0
3/10
01/0
1/10
Although inflation has started to rise gradually, it remains at historically low levels, helping to boost consumer spending power and reduce the amount people are spending on essentials.
Chart 12. Inflation (CPI)% change year-on-year
Source: ONS
Food & Non-alcoholic beveragesAlcoholic beverages, Tobacco & Narcotics
Clothing & FootwearHousing, Water & Fuels
Furn, HH equip & Repair of the houseHealth
TransportCommunication
Recreation & CultureEducation
Hotels, Cafes & RestaurantsMiscellaneous goods & Services
Total inflation 0.20.5
-0.61.1
10.0
1.72.3
4.8
0.62.7
0.7
1.52.1
0.20.31.0
0.35.0
-1.4-0.2
-2.9-1.7
-0.3-0.3
-0.2
-0.3
Dec 14 Dec 15
Overall consumers continue to move away from defensive spending behaviour, while expansionary behaviour returned to a three-year high. Fewer consumers reported buying fewer items and saving, while more consumers reported buying more items.
Chart 13. Expansionary and defensive spending behaviour% UK consumers spending more or less
Defensive Expansionary
21%
22%
23%
24%
25%
26%
27%
28%
Q42015
Q32015
Q22015
Q12015
Q42014
Q32014
Q22014
Q12014
Q42013
Q32013
Q22013
Q12013
Consumer spendingRetail sales record a surprise drop in December
The Deloitte Consumer Tracker Q4 2015 Consumers end 2015 in buoyant mood | 5
Consumer financeSaving and borrowing both rise again
More customers claim to be paying more money into a savings account than this time last year.
Chart 14. Changes in financial commitments in the last three months Net % of UK consumers
Mortgage(s) repayments Payment into a pensionCredit card(s)/loan(s) repayments Pay money to a savings accountNumber of credit card(s)/loan(s)
-20%
-10%
0%
10%
Q42011
Q12012
Q42012
Q12013
Q42013
Q12014
Q42014
Q12015
Q42015
The UK household savings ratio is, however, still at a historical low.
Chart 15. UK household savings ratio
0%2%4%6%8%
10%12%14%
Source: ONS
Q3
2015
Q2
2015
Q1
2015
Q4
2014
Q3
2014
Q2
2014
Q1
2014
Q4
2013
Q3
2013
Q2
2013
Q1
2013
Q4
2012
Q3
2012
Q2
2012
Q1
2012
Q4
2011
Q3
2011
Q2
2011
Q1
2011
Q4
2010
Q3
2010
Q2
2010
Q1
2010
Q4
2009
Q3
2009
Q2
2009
Q1
2009
Q4
2008
Q3
2008
Q2
2008
Q1
2008
Q4
2007
Q3
2007
Q2
2007
Q1
2007
Q4
2006
Q3
2006
Q2
2006
Q1
2006
Q4
2005
Q3
2005
Consumer borrowing also continues to rise. This helped to boost spending in the final quarter of 2015.
Chart 16. Consumer creditNet secured and unsecured lending to individuals (% change year-on-year)
-4-202468
101214
UK personal borrowing: Dwellings-net lending (%YOY) SADL
UK consumer credit-net unsecured lending to individuals (% YOY)
Source: Thomson Reuters Datastream
11/1
/15
9/1/
157/
1/15
5/1/
153/
1/15
1/1/
1511
/1/1
49/
1/14
7/1/
145/
1/14
3/1/
141/
1/14
11/1
/13
9/1/
137/
1/13
5/1/
133/
1/13
1/1/
1311
/1/1
29/
1/12
7/1/
125/
1/12
3/1/
121/
1/12
11/1
/11
9/1/
117/
1/11
5/1/
113/
1/11
1/1/
1111
/1/1
09/
1/10
7/1/
105/
1/10
3/1/
101/
1/10
11/1
/09
9/1/
097/
1/09
5/1/
093/
1/09
1/1/
0911
/1/0
89/
1/08
7/1/
085/
1/08
3/1/
081/
1/08
11/1
/07
9/1/
077/
1/07
5/1/
073/
1/07
1/1/
0711
/1/0
69/
1/06
7/1/
065/
1/06
3/1/
061/
1/06
11/1
/05
6 | The Deloitte Consumer Tracker Q4 2015 Consumers end 2015 in buoyant mood
In the coming months, consumers expect to continue to spend less on essentials such as groceries and utilities, allowing them to spend more on discretionary items.
-30%
-20%
-10%
0%
10%
20%
30%
40%
Chart 17. Category spending over the next three monthsNet % of UK consumers spending more by category
-25% -2
3% -21% -1
7%-1
7%
-23%
-22% -1
9% -17% -1
4%
-22%
-23% -2
0%-1
5% -13%
-21%
-22% -2
0%-2
4%-2
4%-2
6%-2
5%
-20% -1
6% -14% -1
0% -8% -4
%0% 0%1% 1% 1% 1%
4%8%
5%2%
5%9%
4%
10%
10%
7%
17%
30%
31%
12%
7%
-2%
-3%
-8%
-8% -4
%-4
% -1%
-1%
-1%
-1%
-1%
-1%
-2%
-3%
-8%
-9%
-2%
-2%
-2%
-1%
-6%
-6%
-19% -1
7% -13% -1
0% -9%
-16% -1
4%-1
4%
Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015
Gro
cery
sho
ppin
g fo
rfo
od a
nd n
on-a
lcoh
olic
beve
rage
s
Alc
ohol
ic b
ever
ages
and
toba
cco
Clo
thin
g an
d fo
otw
ear
Hou
sing
(e.g
. ren
t,m
ortg
age,
mai
nten
ance
)
Uti
lity
bills
(e.g
. wat
er,
elec
tric
ity,
gas
and
oth
er f
uels
)
Furn
itur
e an
d ho
mew
are
Maj
or h
ouse
hold
app
lianc
es(e
.g. w
ashi
ng m
achi
ne, f
ridg
e,co
oker
,vac
uum
cle
aner
, etc
.)
Land
line/
mob
ile p
hone
,In
tern
et a
nd c
able
/TV
sub
scri
ptio
ns
Elec
tric
al e
quip
men
t(e
.g. P
Cs/
lapt
op, t
elev
isio
n,m
obile
pho
ne d
evic
e, e
tc.)
Goi
ng o
ut (e
.g. c
inem
a,th
eatr
e, c
once
rts,
etc
.)
Res
taur
ants
and
hot
els
(eat
ing
out
and
shor
t br
eak)
Hol
iday
s (lo
ng b
reak
)
Hea
lth
Educ
atio
n
Pens
ions
and
insu
ranc
e
Tran
spor
t
While many indicators suggest consumer confidence is set to keep rising, there are some hurdles to overcome in the next few months. The Brexit vote, for instance, will cause some uncertainty over interest rates. The latest edition of the Deloitte CFO Survey shows that nearly a third of UK CFOs remain undecided.
Chart 18. CFO attitudes to EU membership% of CFOs who gave the following responses when asked whether it is in the interests ofUK businesses for the UK to remain a member of the EU
Source: Deloitte CFO survey Q4 2015
0%
10%
20%
30%
40%
50%
60%
70%
80%
Don’t know,no strong opinion,prefer not to say
Too early to say:Depends on results
of renegotiation
NoYes
2015 Q2 2015 Q4
74%
62%
2% 6%
23%28%
1% 4%
In addition, the latest survey also showed a decline in CFO confidence and appetite for risk has declined for the third consecutive quarter, putting greater emphasis on the consumer sector to generate further growth.
15Q4
15Q1
14Q4
14Q1
13Q4
13Q1
12Q4
12Q1
11Q4
11Q1
10Q4
10Q1
09Q4
09Q1
08Q4
08Q1
07Q4
2007Q3
-80%
-60%
-40%
-20%
0%
20%
40%
60%
Mor
e op
tim
isti
cLe
ss o
ptim
isti
c
Chart 19. Business confidenceNet % of CFOs who are more optimistic about financial prospects for their company now than three months ago
Source: Deloitte CFO survey Q4 2015
OutlookPotential hurdles in the coming months
The Deloitte Consumer Tracker Q4 2015 Consumers end 2015 in buoyant mood | 7
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ContactsNigel WixceyIndustry Leader, Consumer Business020 7303 [email protected]
Ian GeddesLead Partner, UK Retail020 7303 [email protected]
Graham PickettLead Partner, UK Travel, Hospitality and Leisure01293 [email protected]
About this researchThe 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 4 and 6 January 2016.
A note on the methodologySome of the figures in this research show the results in the form of a net balance. This means that in a survey of 100 respondents, 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.
8 | The Deloitte Consumer Tracker Q4 2015 Consumers end 2015 in buoyant mood