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The Deloitte Consumer Tracker Ripe for the picking? Q2 2013 A Deloitte Insight Report
The Deloitte Consumer TrackerRipe for the picking?
Q2 2013
A Deloitte Insight Report
Contents
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 28 June and 3 July 2013.
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.
Executive summary 1
Consumer confidence 2
Sources of finance 4
Economic outlook 5
Spending behaviour in the last quarter 6
Consumer spending outlook 9
Contacts 11
Another step on the long road to recovery as consumer confidence remains on an upward trend.
Against a backdrop of a brightening UK economic outlook, the latest Deloitte Consumer Tracker shows that key measures of confidence are rising compared to the same period a year ago.
Pressures on consumers are continuing to ease. Rising employment, increased housing market activity and low inflation continue to provide the right conditions for a recovery in the UK consumer economy. Moreover, consumer sentiment about the level of their disposable income is at its highest since The Tracker was launched in 2011, albeit still negative.
In a sign of a polarised consumer economy emerging, Deloitte UK research shows that sentiment and confidence are stronger among the more affluent. Higher income earners are more likely to have benefited from an income rise, with 38 per cent saying they received a pay rise or a bonus compared to 12 per cent of the lowest income group. What is perhaps more significant is that higher income earners’ level of confidence in their disposable income has moved into positive territory for the first time since The Tracker began.
Consumers are also becoming less defensive. Fewer are trading down, bargain hunting or buying on sale compared to the same period a year ago.
The service sector is already benefiting from this shift in consumer behaviour. Leisure activity is picking up as consumers look for affordable treats. According to the research spending on restaurants and short breaks is increasing.
A further rise in confidence is expected in the next quarter as economic conditions continue to improve and consumers say they intend to increase their discretionary spending.
The Deloitte Consumer TrackerQ2 2013
Key findings:
•Confidence is up, but consumers remain cautious about their longer-term prospects.
• The UK’s economic outlook brightens, as a series of indicators suggests the economy is recovering.
•Higher income earners’ level of confidence in their disposable income has moved into positive territory for the first time since The Tracker began.
• Consumers are becoming less defensive in a growing sign of austerity fatigue.
• The service sector is benefiting from the shift in consumer behaviour with spending on restaurants and short breaks increasing.
• Consumers intend to increase their discretionary spending in Q3 2013.
The Deloitte Consumer Tracker Q2 2013 1
•UK consumers continue to be less negative about their personal circumstances as Q2 2013 results show an improvement across all measures of confidence compared to Q2 2012.
•Higher income earners‘ level of confidence in their disposable income has moved into positive territory for the first time since The Tracker began.
•Compared to a year ago, the level of confidence in disposable income has moved from minus 12 per cent to 2 per cent for the most affluent.
Figure 1. UK consumer sentiment
Net % of UK consumers who said that their level of confidence has improved during the last three months
Question: Thinking about the following aspects of your life…over the past three months would you say that your level of optimism/confidence in each area is better, the same or worse?
Your job security
Your levelof debt
Your job opportunities/career progression
Your householddisposable income
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013
Mor
e op
tim
isti
cLe
ss o
ptim
isti
c
-43% -3
9%-4
0% -36% -3
3%-3
3% -31% -2
9%
-16% -1
3% -12%
-12% -10%
-13% -1
0%-1
0%
-16% -1
3%-9
%-1
5%-1
0%-1
2%-9
% -8%
-15%
-15%
-10%
-11% -1
0%-1
2%-9
% -7%
•Official confidence measures are also heading in the right direction with the GfK NOP confidence data showing a year‑on‑year rise from minus 29 to minus 21.
Figure 2. UK consumer confidence
-45
-40
-35
-30
-25
-20
-15
-10
-5
0
June13
Feb13
Oct12
Jun12
Feb12
Oct11
Jun11
Feb11
Oct10
Jun10
Feb10
Oct09
Jun09
Feb09
Oct08
Jun08
Feb08
Oct07
Jun07
Feb07
Oct06
Jun06
Source: GfK NOP
Consumer confidence
Confidence is up, but consumers remain cautious about their longer‑term prospects.
2
•Business confidence is equally encouraging. The Deloitte Chief Financial Officers Survey shows that their optimism has risen for the fourth consecutive quarter and now runs above its long‑term average.
Figure 3. Business confidence
Net % of CFOs who are more optimistic about financial prospects for their company now than three months ago
Less
opt
imis
tic
Mor
e op
tim
isti
c-70%
-50%
-30%
-10%
10%
30%
50%
70%
2013 Q2
2012Q4
2012Q1
2011Q2
2010Q3
2009Q4
2009Q1
2008Q2
2007Q3
Source: Deloitte CFO Survey Q2 2013
•But the gradual rise in consumer confidence could be halted by consumers’ negative perceptions about the UK economy and their sentiment about their disposable income prospects for 2014.
•While 23 per cent of consumers believe the UK economy is showing signs of recovery, 47 per cent do not foresee improvements in their level of disposable income in 2014.
Figure 4. Consumer sentiment on the UK economy, disposable income prospects in 2014 and real income growth expectations
% of UK consumers
Question: To what extent do you agree or disagree with each of the following statements?
Strongly disagree/Disagree Strongly agree/Agree
6%7%
4%
Over the next 25 years, I believereal income will increase at the
same rate it did in the last25 years (i.e. 62)
I believe my level of disposable income will be better in 2014
compared with what it currently is
I believe the UK economy is showing signs of recovery
44%
47%
46%
23%
14%
21%
The Deloitte Consumer Tracker Q2 2013 3
Sources of finance
•Year on year, personal circumstances affecting disposable income remain unchanged in Q2 2013, other than a marginal increase in the proportion of households receiving a pay rise or a bonus.
•However, higher income earners are more likely to have benefited from an income rise, with 30 per cent saying they received a pay rise or a bonus compared to 12 per cent of the lowest income group.
Figure 5. Changes in personal household circumstances in the past three months
% of UK consumers
Question: Thinking about your household circumstances in the past three months, which of the following apply to you or someone in your household?
Q2 2012
14%12%
8%8%
5%4%
4%3%
3%3%
Q2 2013
Adult with no income joined the household
A dependent child or family member became financially independent/recently
became employed
Being laid off/made redundant/lost job
You or someone in your household started a new job (e.g. part-time or full-time)
You or someone in your household received a pay rise/bonus
•Encouragingly, despite further public sector pay restraint and modest pay rises in the private sector, the negative differential between inflation and earnings has narrowed.
•While real income continues to fall, recent consensus forecasts indicate that real household disposable income will increase by 0.7 per cent in 2013 and 1.0 per cent in 2014.
Figure 6. Average earnings growth and UK national inflation
-4
-2
0
2
4
6
8
May
06
Aug
06
Nov
06
Feb
07
May
07
Aug
07
Nov
07
Feb
08
May
08
Aug
08
Nov
08
Feb
09
May
09
Aug
09
Nov
09
Feb
10
May
10
Aug
10
Nov
10
Feb
11
May
11
Aug
11
Nov
11
Feb
12
May
12
Aug
12
Nov
12
Feb
13
May
13
Average weekly earnings including bonuses (%) UK annual CPI inflation (%)
Source: Office for National Statistics (ONS)
•However, consumers remain cautious and are continuing to anticipate low income growth by increasing payments into savings accounts.
•The data indicates that consumers are paying off credit card balances more slowly.
•This coincides with evidence from the Bank of England pointing to a small increase in the value of unsecured net lending in the first quarter of 2013.
Figure 7. UK consumer attitudes to financial obligations in the last three months
Net % of UK consumers
Question: Thinking about the financial obligations of your household over the last three months, what if anything, did you do differently compared to four to six months ago; increase, do the same or reduce?
Number of credit card(s)/loan(s)Pay money to a savings account
Q1 2012
Dec
reas
eIn
crea
se
Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013
-10%
-8% -8%-7% -7%
-4% -4%
-2%-3%
-2%
-6% -6%
With no growth in their real income, consumers are paying off their unsecured debt more slowly.
4
Economic outlook
•Recent revisions to official data show that the UK narrowly avoided a double‑dip recession at the beginning of 2012.
•The UK’s economic outlook brightens with broad‑based rises in housing and consumer confidence.
•In addition, the International Monetary Fund said it expects the UK economy to grow by 0.9 per cent this year, up from the 0.6 per cent growth it projected in April.
•This upgrade follows a series of indicators that has suggested the economy is recovering, having grown by 0.3 per cent in the first three months of the year.
Figure 8. GDP growth: Actual and forecast (%)
UK expected to see weakrecovery in 2013
Quarter-on-quartergrowth
Forecasts
Year-on-yeargrowth
-8
-6
-4
-2
0
2
4
6
2013201220112010200920082007
Source: ONS, consensus forecasts from The Economist and Deloitte calculations
•The Deloitte CFO Survey shows that their perceptions of economic uncertainty have fallen significantly since 2012. 73 per cent of CFOs believe their businesses face an above normal, high or very high level of external macroeconomic uncertainty, down from a peak of 97 per cent in late 2011.
•However, a decline in manufacturing output and an increase in the trade deficit during May demonstrate how fragile the recovery is.
Figure 9. UK CFOs uncertainty
% of CFOs who rate the level of external financial and economic uncertainty facing their business as above normal, high or very high
68%
73%
78%
83%
88%
93%
98%
2013Q2
2013Q1
2012Q4
2012Q3
2012Q2
2012Q1
2011Q4
2011Q3
2011Q2
2011Q1
2010Q4
2010Q3
Source: Deloitte CFO Survey
The UK’s economic outlook brightens as a series of indicators suggests the economy is recovering.
The Deloitte Consumer Tracker Q2 2013 5
Spending behaviour in the last quarter
Consumers are becoming less defensive in a growing sign of austerity fatigue.
•Despite the improvement in consumer confidence, overall spending is hesitant in the second quarter of 2013.
•While spending is down on transport, reflecting the slight reduction in fuel prices, spending on utilities is up.
•Spending on clothing and footwear is also down as the cold weather in March continued into April.
•But consumers have found an area where they could indulge: spending in restaurants and on short breaks improves from minus 17 per cent in Q2 2012 to minus 13 in the second quarter of 2013.
Figure 10. Category spending in the past three months
Net % of UK consumers spending more by category over the past three months
Question: Thinking about all the expenses in your household, for each of the following, would you say you have spent more, less or the same in the past three months?
Q2 2013Q2 2012
Util
ity b
ills
(e.g
. wat
er, e
lect
ricity
,ga
s an
d ot
her
fuel
s)
Gro
cery
sho
ppin
g fo
r fo
od a
ndno
n-al
coho
lic b
ever
ages
Tran
spor
t
Hou
sing
(e.g
. ren
t, m
ortg
age,
mai
nten
ance
)
Land
line/
mob
ile p
hone
, Int
erne
t an
dca
ble/
TV s
ubsc
riptio
ns
Hol
iday
s (l
ong
brea
k)
Maj
or h
ouse
hold
app
lianc
es(e
.g. w
ashi
ng m
achi
ne, f
ridge
,co
oker
, vac
uum
cle
aner
, etc
.)
Rest
aura
nts
and
hote
ls (e
atin
gou
t an
d sh
ort
brea
k)
Elec
tric
al e
quip
men
t (e
.g. P
Cs/
lapt
op,
tele
visi
on, m
obile
pho
ne d
evic
e, e
tc.)
Alc
ohol
ic b
ever
ages
and
tob
acco
Furn
iture
and
hom
ewar
e
Clo
thin
g an
d fo
otw
ear
Goi
ng o
ut (e
.g. c
inem
a,th
eatr
e, c
once
rts,
etc
.)
-23%
-13% -16% -14%
-10%
-17%
-9% -6%
6% 10%
15% 18%
27%
-22%
-15% -15% -14% -13% -13% -10%
-4%
2%
9% 11%
19%
33%
Incr
ease
Dec
reas
e
•Although UK consumer price inflation rose to 2.9 per cent in June, up from 2.7 per cent in May, inflation is expected to remain around 2.6 per cent in 2013.
Figure 11. Consumer Price Index
June 2013June 2012
-5 0 510
15 20
Food & Non-alcoholic beverages
Alcoholic beverages, Tobacco & Narcotics
Clothing & Footwear
Housing, Water & Fuels
Furniture, Household equipment & Repairs
Health
Transport
Communication
Recreation & Culture
Education
Hotels, Cafes & Restaurants
Miscellaneous goods & Services
Total inflation
2.3
4.8
-0.8
6.0
3.5
3.7
0.9
4.9
0.3
5.1
3.1
1.9
2.4
3.8
6.4
3.1
4.4
0
2
1.7
2.9
1.3
19.7
2.5
1.5
2.9
Source: ONS
6
•Consumers are becoming less defensive in a growing sign of austerity fatigue. There are fewer consumers trading down, bargain hunting or buying on sale in the second quarter of 2013 compared to Q2 2012.
Figure 12. Reasons consumers spent less in the last three months
% of UK consumers spending less
Question: You just mentioned you spent less in the last three months, which of the following reasons apply to you?
Sale/special offer
Trading down
Controlling impulse purchasingBargain hunting
5%
10%
15%
20%
25%
30%
35%
40%
Q2 2013Q1 2013Q4 2012Q3 2012Q2 2012Q1 2012Q4 2011Q3 2011
•A sign that consumers are spending more is the recent data on the saving ratio (the difference between revenue and expenditure) which shows a decline from 7.4 per cent in Q1 2012 to 4.2 per cent in the same period of 2013.
Figure 13. Saving ratio (%)
0
1
2
3
4
5
6
7
8
9
10
Q12013
Q32012
Q12012
Q32011
Q12011
Q32010
Q12010
Q32009
Q12009
Q32008
Q12008
Q32007
Q12007
Q32006
Q12006
Source: ONS
The Deloitte Consumer Tracker Q2 2013 7
•In Q1 2013 household expenditure was up for the fourth consecutive quarter.
Figure 14. Consumer spending
-6
-4
-2
0
2
4
6
Q1‘13
Q3‘12
Q1‘12
Q3‘11
Q1‘11
Q3‘10
Q1‘10
Q3‘09
Q1‘09
Q3‘08
Q1‘08
Q3‘07
Q1‘07
Q3‘06
Q1‘06
Q3‘05
Q1‘05
Q3‘04
Q1‘04
Q3‘03
Q1‘03
Q3‘02
Q1‘02
Q3‘01
Q1‘01
Source: ONS
•UK retailers are also seeing strong sales growth, with both the volume of goods sold and total spending rising in June.
Figure 15. UK retail sales
-6
-4
-2
0
2
4
6
8
Retail sales (%) – Volume SA
Jun03
Dec03
Jun04
Dec05
Jun06
Dec06
Jun07
Dec07
Jun08
Dec08
Jun09
Dec09
Jun10
Dec10
Jun11
Dec11
Jun05
Dec04
Three months moving average (%)
Jun12
Dec12
Jun13
Source: ONS
8
Consumer spending outlook
•The number of consumers feeling upbeat is rising as our research indicates that spending in most discretionary categories is expected to increase over the next quarter.
Figure 16. Category spending in the next three months
Net % of UK consumers spending more by category over the next three months
Question: And now thinking about all the expenses in your household in the next three months, for each of the following, would you say you will spend more, less or the same compared to four to six months ago?
Q2 2013Q2 2012
Uti
lity
bills
(e.g
. wat
er, e
lect
rici
ty,
gas
and
othe
r fu
els)
Gro
cery
sho
ppin
g fo
r fo
od a
ndno
n-al
coho
lic b
ever
ages
Tran
spor
t
Hou
sing
(e.g
. ren
t, m
ortg
age,
mai
nten
ance
)
Land
line/
mob
ile p
hone
, Int
erne
tan
d ca
ble/
TV s
ubsc
ript
ions
Hol
iday
s (lo
ng b
reak
)
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
.)
Furn
itur
e an
d ho
mew
are
Alc
ohol
ic b
ever
ages
and
tob
acco
Res
taur
ants
and
hot
els
(eat
ing
out
and
shor
t br
eak)
Goi
ng o
ut (e
.g. c
inem
a, t
heat
re,
conc
erts
, etc
.)
Elec
tric
al e
quip
men
t (e
.g. P
Cs/
lapt
op,
tele
visi
on, m
obile
pho
ne d
evic
e, e
tc.)
Clo
thin
g an
d fo
otw
ear
Dec
reas
eIn
crea
se
-19% -17% -18% -19% -18%
-15% -16%
-9%
-5%
3% 3% 4%
12%
-17% -17% -17% -16% -15%
-13% -13%
-6% -4%
3% 3% 6%
16%
•The household goods sector is likely to benefit from an improving property market. The GfK NOP major purchases measure increased five points in June to minus 20, eight points higher than this time last year.
Figure 17. Major purchases intentions
-50
-40
-30
-20
-10
0
10
20
20132012201120102009200820072006
Source: GfK NOP
Consumers intend to increase their discretionary spending in Q3 2013.
The Deloitte Consumer Tracker Q2 2013 9
•A significant proportion of consumers are claiming to be satisfied with the financing environment, with 45 per cent indicating they have sufficient access to credit and 38 per cent saying current borrowing costs are affordable.
•But consumer sentiment could change if market interest rates were to rise, potentially undermining the nascent recovery in the consumer economy.
Figure 18. Consumer sentiment on access to credit and cost of borrowing
% of UK consumers
Question: To what extent do you agree or disagree with each of the following statements?
-30% -20% -10% 0% 10% 20% 30% 40% 50%
I believe the cost of borrowing money is sufficiently low at the moment
(i.e. interest rates)
I have access to the credit that I need(e.g. credit cards, loans and mortgages) 45%
38%23%
16%
Strongly agree/Agree
Strongly disagree/Disagree
10
Author
Céline FenechResearch Manager, Consumer Business020 7303 [email protected]
Consumer Business Insight
Ben PerkinsHead of Research, Consumer Business020 7307 [email protected]
Leadership team
Nigel 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]
Contacts
The Deloitte Consumer Tracker Q2 2013 11
Notes
12
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