Consumer confidence and spending in a quarter dominated by continued Brexit uncertainty
After a year of social and political turbulence, our data shows consumer confidence has declined since Q1 of this year"
Savanta’s Consumer Compass has been measuring consumer confidence since 2010. Looking at the ‘then and now’ very broadly, a picture emerges of consumers who are both more confident about their financial situation (-15% NET confidence in Q3 2010 vs -3% NET confidence in Q3 2019), and who have more disposable income (-26% NET more/less in Q3 2010 vs -5% NET more/less in Q3 2019) than just after the financial crisis.
The Brexit effect
However, after a year of social and political turbulence, our data shows consumer confidence has, in fact, declined since Q1 of this year with consumers now (in Q3 2019) not only less confident but reporting that they have less disposable income too.
When we overlay these changes with spending habits, we see two clear areas that appear to be taking the hit for such uncertainty: fashion and personal grooming. In both cases it is women who are driving the trend with 45% saying they are spending less now than in Q1 2019 on both fashion (4% increase in those claiming to spend less) and personal grooming (increase of 6%).
Also seemingly prepared to reduce spend on personal grooming when the purse strings tighten are younger people, with both Gen Z consumers (18-24 years old) and millennials (25-34 years old) spending less in this category than earlier this year – 34% and 40% respectively.
Millennials are also spending less on fashion overall, with 47% of 25-34-year olds saying they are spending less in Q3 of 2019, an increase of 8 percent on Q1. This could be partly due to environmental concerns causing millennials to think twice about spending on ‘fast fashion’, meaning that fashion is the sector first hit when overall disposable income and economic confidence drop.
Looking at the younger Gen Z consumers shows different spending trends: they are likely to be spend less on home improvement and DIY in Q3 of this year when compared to Q1 (29%, an increase in lower spending of 4 points on Q1). This is perhaps unsurprising given wider trends of rising house prices and slow growth in wages for younger people who have been dubbed ‘generation rent’.
Where are young people spending?
Are there areas, though, where these same consumer groups are spending more?
The short answer is, yes. And, furthermore, these trends paint an interesting picture of what Gen Z and millennial consumers are prioritising their spending on.
Let’s start with Gen Z… the youngest age bracket tracked by Savanta’s Consumer Compass. This audience is spending more in Q3 on both ‘eating out’ (26%) and drinking out’ (20%) than they were in Q1. And, in both cases, these categories have seen a significant increase with eating out and drinking out up by 12 and 8 points respectively.
Millennials also appear to be spending more on experiences than they were in Q1 of this year. Our data shows that these 25-34-year-old consumers report spending more on holidays (15%) and gym or sports/fitness membership (9%) in Q3 of 2019 than Q1 of the same year. As with other data picked up on by our Consumer Compass, these changes are particularly relevant when placed alongside broader social trends. Britons are drinking less alcohol and smoking less tobacco than they were just a few decades ago. This Consumer Compass data points to millennials driving this trend in Q3 of 2019, with those spending more on gym or sports/fitness membership up 4 points on Q1.
Overall, consumer spending and confidence have remained relatively stable since the beginning of 2019. However, with Brexit developments still unfolding some sectors could be at more risk than others when it comes to consumers’ spending priorities.
This article originally appeared on mca.org.uk