Consumer confidence hits three-year high

Overall confidence is three percentage points higher than a year ago and 13 points higher than when the Tracker began in Q3 2011.

The biggest rise in positive sentiment was in household disposable income, which improved by 7 points year-on-year (from -25 per cent in Q3 2013 to -18 per cent in Q3 2014). 

Spending on essential items declined for the third successive quarter, allowing consumers to switch more of their spending to discretionary items. Significantly, net spending on holidays moved into positive territory for the first time since the Consumer Tracker began (from -15 per cent in Q3 2011 to 4 per cent in Q3 2014).

“Even without growth in real incomes, consumer confidence has continued to rise. Lower oil prices and commodity prices and a strengthening pound have led to a sharp decline in inflation,” says Ian Stewart, chief economist at Deloitte. 

“An improving jobs market and lower inflation have been a real tonic for UK consumers. With inflation on a declining path and earnings heading up, the scene is set for a recovery in real incomes around the turn of the year.”

A strong job market has boosted confidence, with fewer consumers suffering a reduction or loss of income in Q3 2014 compared to last year (down from 12 per cent  in Q3 2013 to 11 per cent in Q3 2014). This confidence appears to be long term, with 20 per cent of consumers expecting an increase in their income in 2015, compared to just 11 per cent who expect a decrease.

“Looking ahead to 2015, consumers appear in positive mood as they expect the value of their properties to continue to rise and their levels of debt to fall,” adds Ben Perkins, head of consumer business research at the firm.  

“The decline in the amount spent on essentials like food and utility bills is also expected to continue. However, with the prospect of higher interest rates, along with a cooling housing market, there are still concerns on the horizon.”

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