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Consumer confidence drops for first time in a year

Consumer confidence has fallen for the first time in 12 months, according to the Deloitte Consumer Tracker, which surveys 3,000 adults on consumer spending attitudes and behaviour.

Consumer confidence dropped to -11% the final quarter of 2013, down from -8% in the third quarter of the year.

Deloitte chief economist Ian Stewart said: “In a sign of the headwinds facing the consumer sector, the number of pessimists continues to outnumber the optimists across all measures of confidence in our survey.

“Weak wage growth in particular is still putting pressure on household budgets. Recent gains in consumer spending have been largely fuelled by people dipping into their savings, higher levels of borrowing and lower inflation, rather than an increase in real disposable income.”

However, Stewart was optimistic that the drop in confidence was likely to just be temporary, describing it as “a setback rather than a longer-term, underlying decline in confidence”.

He added: “Consumer sentiment is higher than it was a year ago and an accelerating economy and lower inflation should bolster consumer incomes in 2014.”

Deloitte said falling inflation had helped reduce downward pressure on discretionary spending, with people spending more on categories including clothing, going out and electricals compared to a year ago.

Ben Perkins, head of consumer business research at Deloitte, said: “Consumers are being selective, trading down in some categories, in order to be able to trade up in others. We saw this over the Christmas period as people bought value ranges in some product areas, so that they could treat themselves and purchase a few premium items in their preferred categories. Consumers have become savvy at managing their budgets and this is a new habit that is likely to stay.”

 

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