Consumer confidence has fallen for the second quarter in a row because of rising grocery costs, says a recent leading survey showing.
According to the latest Deloitte consumer tracker, rising grocery and utility bills in the last quarter of 2021 increased personal spending for 41 percent of consumers, up from 36 percent in the third quarter.
This meant consumer confidence was down by one percentage point to 11 percent and that “disposable income sentiment” fell by five percentage points to -26 percent, nine percentage points lower than in the fourth quarter of 2020.
However, Deloitte said that some consumers – those with more savings – were protected to some extent from the falls in confidence.
Céline Fenech, consumer insights lead at Deloitte, said: “With the expected squeeze on spending power and higher inflation, another fall in confidence may dent the hopes of a consumer recovery.
“However, some consumers are still in the fortunate position of having higher levels of savings compared with before the pandemic, indicating some financial resilience.
“The further easing of restrictions should also support an improvement in sentiment, in turn boosting spending.
“However, this may not occur until inflation has peaked, so the critical question in the meantime is whether consumers can afford to continue spending.”
With essential spending set to take precedence over discretionary spending in the quarter ahead, consumers are signalling that holidays and socialising could be delayed, despite pent-up demand, states the Deloitte report.
Consumers indicated that their intended spending on discretionary items will fall by nine percentage points in Q1 2022. This is more pronounced in social categories, including going out and eating at restaurants, down -20 and -17 percentage points respectively. Whilst overall consumer spending on essential goods and services will remain flat in Q1 2022, utility bill expenditure specifically is expected to increase by nine percentage points, quarter-on-quarter.
Deloitte’s consumer tracker is based on responses from more than 3,000 UK consumers, taken just after the quarter being covered.
For the latest quarter, the survey was carried out between 31 December and 5 January.
The news comes shortly after the Office for National Statistics (ONS) revealed food inflation rates had reached 5.4 percent, the highest in over 30 years. Meanwhile, the price of commodities and goods continue to be impacted by pandemic-related shifts in demand and supply and post-Brexit supply chain issues.
