Summer ended with a small increase in consumer confidence, with around half of people reporting treating themselves to a meal out or new clothing in the last three months, shows a report published today (Sept 18), also highlighting how cost of groceries remain the top three reasons why people feel that the UK economy is worsening.
The findings come from KPMG UK’s latest Consumer Pulse survey, which in early September asked 3000 people across the UK about their quarterly confidence and spending, with both personal finance and economic scores seeing marginal improvement.
56 per cent of people told KPMG that they feel financially secure, rising one percentage point from the previous quarter. Being able to afford their bills (51 per cent), having savings or investments for unforeseen circumstances (44 per cent), and being able to afford their monthly spend on groceries and other everyday items (38 per cent) are the top three reasons why people feel secure in their personal finances.
While the majority of people (55 per cent) believe that the UK economy is worsening, the measure fell from 60 per cent last quarter and continued the downward trend from 62 per cent when the year began. Meanwhile, those who feel the economy is improving increased by one percentage point to 13 per cent.
The cost of groceries (78 per cent), utilities (73 per cent), and eating and drinking out (51 per cent) remain the top three reasons why people feel that the UK economy is worsening.
Economic pessimism continues to impact spending, but the scale of impact reduced this quarter. Among those feeling that the UK economy is worsening, over half (51 per cent) report reducing everyday spend as a precaution (55 per cent in Q2), 36 per cent saving more (37 per cent in Q2) and 33 per cent deferring big-ticket purchases (38 per cent in Q2).
Despite the ongoing levels of concern regarding the economy, personal financial confidence levels helped to drive summer spending activity, with consumers saying they:
- Ate out in a restaurant: 53 per cent / fast food: 44 per cent.
- Went out for an alcoholic drink: 38 per cent / non-alcohol drink: 28 per cent.
- Ordered takeaway food at home: 40 per cent.
- Bought new clothing: 45 per cent / new footwear: 27 per cent.
- Went to the cinema: 29 per cent / gig, theatre, other ticketed event: 23 per cent.
Spend in relation to a holiday was the most common (30 per cent) big-ticket purchase over the last three months, followed by minor home improvements (14 per cent), and personal technology (12 per cent). But four in ten (39 per cent) consumers say they made no larger price purchases at all.
Commenting on the findings, Linda Ellett, UK Head of Consumer, Retail and Leisure for KPMG UK, said: “Healthy levels of summer spending activity were driven by resilient consumer financial confidence, the warm weather, and coincided with marginal improvement regarding perception of the UK economy.
"The retail sector saw sales growth, particularly in the early part of summer, while over half of consumers report having eaten out and around four in ten going out for a drink.
“The final quarter of the year, including Black Friday promotional month and Christmas, is key for retailers – who will be hoping to improve further upon the early summer months. But macroeconomic challenges, both domestically and globally, remain, as does the impact of an ongoing majority of consumers feeling the UK economy is worsening. Spending, particularly on big ticket items, remains subdued, due to consumer caution.
"October’s Budget presents another opportunity for the government to reassure consumers about the direction of the economy and cost of living pressures heading into the winter and beyond. This could make all the difference for retailers in this crucial period.”
More consumers say they bought in-store (63 per cent) than online (57 per cent) during the summer months - with debit card the most common (52 per cent) way of paying (vs cash 39 per cent and credit card 38 per cent).
Second-hand shopping continued to show popularity, with a fifth (20 per cent) of people reporting buying clothing in the last three months, 9 per cent buying footwear, and 18 per cent selling clothing or footwear. Selling second-hand goods was highest among (24 per cent of) 18- to 24-year-olds.
Q4 forecast
Looking to the next three months, consumers most commonly (37 per cent) said they were unlikely to spend more than during the previous quarter. But among those predicting they will spend more: 27 per cent say so on dining out, 22 per cent on new clothing, and 19 per cent on fast food.
Spending on a holiday is the most common big-ticket spending plan, for 28 per cent of people. But 42 per cent of people said they had no plans for larger spending at all.