Consumer confidence dropped marginally in the last quarter of 2024, shows a recent industry report, suggesting concerns around disposable income and prices of essentials remain though consumer confidence is expected to recover in 2025.
According to the Deloitte consumer tracker released today (20), this is the first time since 2022 that confidence has stalled, although confidence varied in different areas examined by the survey.
Consumer sentiment towards personal debt rose by six percentage points, although this was not enough to compensate for falls in other measures. There was a four percentage point drop in confidence about household disposable income and a 14 percentage point drop in confidence about the UK economy.
Almost half (42 per cent) of consumers said they spent more on Christmas this year, but most (54 per cent) put this down to higher prices.
The Deloitte survey is based on responses from 3,200 UK consumers aged over 18 and was taken between 3 and 6 January.
Céline Fenech, consumer insight lead at Deloitte, said, “While many consumers appear to be feeling better about paying debts or borrowing following the cuts to interest rates, concerns around disposable income and prices of essentials remain.
“Consumers continue to look for value and make compromises following a once-in-a-generation surge in costs that has diminished consumers’ spending power.
“Many consumers continue to compare today’s higher prices to those of pre-pandemic, regardless of the rate of inflation falling.”
Fenech added that despite the fall in confidence overall, Deloitte expected consumer confidence to recover in 2025.
Ian Stewart, chief economist at Deloitte, said, “Despite a challenging start to the year, we expect to see growth coming back over the summer, with interest rate cuts, rising real incomes and buoyant government spending helping drive the recovery.
“For 2025 as a whole, we expect UK GDP growth to come in at around 1 per cent, a rather better outcome than last year.”
Among the survey’s findings were that two in five consumers (40 per cent) said they did their Christmas shopping before December, which could have been a tactic to spread the cost of the festive season.
Over a third agreed that they bought more gifts (37 per cent) on discount and more food (43 per cent) using promotions and loyalty cards discounts.
About 52 per cent of those surveyed greed they were generally more frugal and careful this Christmas, while half (50 per cent) agreed they consciously cut down on any luxuries.
Oliver Vernon-Harcourt, head of retail at Deloitte, said, “As many grapple with an inflation hangover, consumers likely need more time to digest the volatility and uncertainty of the last few years.
“Consumer recovery this year will depend on what happens with inflation, especially in the more essential categories like food.
“With our research showing that 80 per cent of consumers still expect prices to go up further in 2025, consumer demand is likely to remain subdued while things settle in the first half of the year.
“Beyond that, with factors such as the rise in the minimum living wage, more public spending, easing monetary and fiscal policies – combined with consumer confidence hopefully continuing to recover – we should see demand improving.”
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