PRESS RELEASE : UK Consumer Confidence hits highest peak in 18 months [July 2023]

The press release issued by PWC on 25 July 2023.

• Improvement of 31 points from last September taking it from -44 to now -13
• Inflation is still impacting spending intentions with 4 in 5 consumers stating it as the driving factor behind how they shop
• Under 25s remain the most positive age group (at+21), with 55-to-64s  the least positive (-33)
• Over 40% of over 65’s plan on making NO cutbacks to their spending over the next 3 months & they continue to prioritise holidays and eating out more than other age groups

UK Consumers are starting to feel more confident about their spending ability as revealed by the latest PwC Consumer Sentiment Survey.

Sentiment sat at -25 in the Spring post the budget and now sits at -13 with the latest research carried out at the beginning of July. This is a marked improvement from -44 in September 2022 and -32 at the beginning of January 2023. It is the highest sentiment  seen in the last 18 months after a rollercoaster few years following the pandemic and is virtually back to normal, being close to the long term average since 2008.

Inflation remains the single biggest factor affecting spending, with 4 in 5 consumers saying their spending is affected by it. Conversely, only a minority of survey respondents say that they expect interest rates, house prices and rent rises to affect their spending patterns.

There has been an improvement in sentiment across all demographic groups since the Spring, with the variance between age groups and socio-economic groups narrowing.

Under 25s remain the most positive age group (at+21), with 55-to-64s the least positive (-33). The sentiment of 35-44 year olds and 55-64 year olds have increased the most since our last survey, both by 17 points, but all working-age groups have seen significant improvements. Those under 35 are still net positive in line with historical trends, and reflecting lower exposure to inflation for those living at home, and higher relative wage increases for those in work.

Over 65s continue to have higher confidence than 55-to-64 year olds. Almost half of over 65s say they have money at the end of the month for luxuries or to save, compared with only a quarter of under 65s; while fewer than one in 20 pensioners tell us they are struggling with bills. The older demographic have savings and inflation linked pensions to protect them from the cost of living crisis.

From a socio-economic perspective, the least affluent have seen the largest rise in sentiment, but remain the most pessimistic about their finances. Unsurprisingly, the most affluent are still the most positive and are now net positive (at +1) for the first time in almost two years.

Lisa Hooker, PwC Leader of Industry for Consumer Markets talks about the increase in confidence for the retail & consumer sector:

“It is encouraging to see the growth in sentiment across all ages and demographics. Whilst inflation remains the biggest factor affecting finances, we’re also seeing fewer people cutting back and spending intentions have consistently improved over the past 12 months. Retailers need to capitalise on the desire to trade down in the same store rather than trade out and spend on selective treats. But also on those consumers with money left at the end of the month. It is particularly good news for youth focussed retailers as under 25s remain happy to spend but also those targeting the older demographics.  Conversely, those of working age with families are most likely to be deprioritising discretionary spending – can consumer markets businesses help them trade down and economise?”

Eleanor Scott, Leisure Partner at PwC, talks about how consumers are enjoying themselves over the summer months:

“Once the essentials of groceries, kids and pets are accounted for, consumers continue to prioritise holidays, health, home and hobbies in spite of living pressures. In terms of holidays, a lot of people plan to spend the same or more on holidays this year. Older and more affluent people in particular are spending more which is driving a lot of growth in some segments. 35% of people also plan to have a staycation this year which will have a positive impact on the high-street and hospitality sector.”