Consumer confidence has dipped to its lowest level this year, as inflation, the energy crisis and HGV driver shortages take their toll on the outlook to Christmas, according to a new report by PwC.
Following record highs earlier in the year, consumer confidence saw a decline in almost every age, region and demographic category, and there are signs that shoppers are exercising more caution in their spending too.
While most of the declines were only slight, the shift still suggested that “people are beginning to feel uneasy about their financial security,” according to the PwC report.
Despite the fall in consumer confidence though, which is now at +3 on PwC’s index, sentiment has returned to pre-pandemic levels. Notably, it is still positive and higher than at any point between 2016-19 following the EU referendum.
The positive state of consumer confidence is an indicator that of those participating in the survey, more people thought they would be better off in the next 12 months than worse off.
“It’s little surprise that consumer sentiment has not maintained the record levels we saw earlier in the year. But with confidence stronger than last year – and for most of the post-referendum period – it’s not all bad news,” said PwC consumer markets lead Lisa Hooker.
“The inflationary factors that have triggered the decline in sentiment,” she warned though, “are unlikely to ease in the short term, particularly for grocery, utilities and petrol. Combined with the current problems facing those industries in relation to supply, we’re beginning to see it affecting consumers’ day-to-day lives and, in turn, sentiment and demand.”
“For both retail and leisure sectors, the timing couldn’t be worse,” said Hooker.
She continued: “After the disappointment of last year, retailers and hospitality operators desperately need a strong run up to Christmas. Even without lockdowns, they will need to convince consumers to part with savings to have any hope of recovering to pre-pandemic levels.”
Among people under 25 years old, still the most optimistic age group, the report found that the decline in confidence was the fastest, driven in part by the end of the furlough scheme and fewer opportunities for graduates.
Meanwhile sentiment among older age groups declined the most significantly, with 55-64 year-olds now the least optimistic group.
Around half of the 2,070 adults surveyed by the Big Four firm experienced increased grocery or fuel costs even though the survey was run in September before the failure of several large utility companies and the current petrol shortages.