Consumer data suggests that confidence is set to rebound over the summer as COVID-19 retreats, the economy starts to recover, and life gets back to normal for the majority of Brits.
Significantly an increasing number of consumers are feeling more confident about the overall UK economic situation, with the highest figure since recording began.
Our latest Q1 Consumer Compass shows overall confidence on the up and is net positive for the first time in over 10 years. The Consumer Confidence Index (CCI) score 0f 102 exceeds the previous high of 100 in Q4 2015 and is in stark contrast to the historic low of 82 at the start of the COVID-19 pandemic in Q1 2020.
The 20-point increase in confidence since last year is broadly consistent across regions and socio-economic groups and driven by a clearer roadmap out of lockdown. London and the Midlands have climbed the most (+22 points to 109 and 102 respectively), closely followed by the South (+21 points to 102), whilst Scotland rose 13 points to 98.
The steep decline in personal finance confidence in Q1 last year has gradually ebbed away and now consumers are actually net confident. The Net score of +14 is the highest for over 10 years. This is backed by levels of disposable income at historic highs, surpassing the post-2008 financial crisis recovery.
Significantly an increasing number of consumers are feeling more confident about the overall UK economic situation, with the highest figure since recording began. The overall net score of +5 is a far cry from -43 in Q1 2020 and an all-time low of -60 in Q1 2009.
Perceptions of job situations/prospects are also beginning to recover, though levels are still far lower than at the beginning of 2019. A quarter of consumers say that their job situation is worse than last year (24%). Whilst evidence suggests a big ‘wave of relief’ in consumer spending, the economy is still waiting for the end of furlough to see the pandemic’s effect on jobs.
This also goes some way to explaining the fact that, despite high levels of confidence, this has not yet converted to changes in economic resilience. Consumers are still most likely to be feeling cautious about spending, despite the fact that confidence in personal finances has increased, combined with a more positive outlook for the UK economy as a whole. Disposable income has increased +9% points since Q4 2020 and perceptions towards the overall economic outlook by +34% points since Q4 2020.
Key confidence gains this quarter, where we have seen a growth in spend, are in booking outdoor entertainment, where consumers appear to be making plans for the summer and spend on fashion, though further improvement is required to take this back to 2019 levels. However, closed sectors such as tourism and hospitality obviously remain at low levels and it remains to be seen how quickly they will rebound later this year.
On a positive note, anticipated spend in the next 3 months has seen a steep increase, as consumers look forward to the end of lockdown (+8% points since Q4 2020). Figures indicate that we are going to see a boom in spending across the economy in the summer if the recovery continues. Time will tell who benefits quickest from the reopening and if the schedule goes to plan – but the signs are very promising. Fingers crossed!
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