Consumer Confidence Index: Spring 2023

As spring transitions into summer, CIL’s latest quarterly Consumer Confidence Index shows a clear increase in consumer sentiment. Our proprietary Mood and Spend Indexes have seen an improvement, reflecting a greater sense of stability and optimism.

Consumer Confidence Indices

This improvement is also reflected in consumers’ expectations regarding their individual financial positions. As we emerged from the initial COVID-19 lockdowns, confidence gradually eroded due to the harsh economic conditions. Savings were being used up, income fluctuated and the cost of borrowing increased. However, after nearly two years of declining confidence, CIL’s Spend Index has experienced two consecutive quarters of growth, indicating a growing sense of stability.

How do you expect your financial position to change over the next 12 months?

This renewed confidence is particularly notable among higher-income groups, who have returned to positive territory. Given the significant role these groups play in consumer spending, this is a welcome development for the sector.

Outlook for personal finances over the next 12 months

Forward-looking financial position
But we are not out of troubled waters just yet. Almost all consumer groups still intend to limit their spending, especially on big-ticket items, and we remain in a more sustained and higher inflationary environment than anticipated. This will likely take longer to play through than first thought, particularly affecting the price of everyday items. However, it is encouraging to note that only a relatively small proportion of consumers intend to depend on borrowing money to sustain their spending, indicating a positive departure from historical patterns and the potential financial instability associated with excessive borrowing. Fortunately, many consumers, particularly those in lower-income groups, still have savings to fall back on.

Outlook for personal finances over the next 12 months

As previously indicated, this data suggests that we can expect continued polarisation in consumer behaviour. Value-focused grocers, lower-priced restaurants and affordable clothing brands are likely to benefit from consumers’ inclination to trade down, especially as the summer holidays begin. On the other hand, businesses with a premium or luxury but non-big-ticket proposition should remain relatively well-protected.

Detailed look: essential and discretionary items
Diving into the specifics for essential and discretionary items, spend on the home is expected to be the biggest target for cutting back. Lower growth should be expected in the near-term.

The home improvements market is continuing to see a correction from 2021 highs but is expected to stabilise through 2023-24 and return to long-term growth. This is a generally resilient segment due to a baseline level of non-discretionary spend, the nature of consumer decision making around larger spend items, and the relative financial strength of the households that spend most on the UK’s homes. As is also clear in other sub-sectors, the cost-of-living crisis is not affecting everyone equally.

Net 12-month spend outlook, essential and discretionary items only
May 2023

Clothing spend may also come under pressure, but it’s difficult to ignore the reality of spending on summer holiday preparations (where more affordable retailers will likely win out), while the data also suggests resilient demand for certain demographic groups, such as younger men.

Net spend outlook, clothing & footwear
Overall vs. younger men

Net spend outlook, beauty & personal care
Younger females vs. all other females

Beauty products and services continue to be a protected category for younger females. In this sector, newer and more innovative brands may emerge as winners.

Detailed look: out of home
During challenging times, visits to pubs and restaurants are typically areas where consumers cut back. However, the latest market data suggests that spend in this area can be resilient for some, particularly younger age and middle-income plus groups. The truth is that specific types of establishments and demographics behave differently. For example, establishments with focused menus and more affordable offerings or those offering competitive socialising activities like table tennis, darts, or pool are prioritised. Separately, discounting is once again becoming increasingly prevalent with operators such as Carluccio’s, Zizzi and Ask Italian all recently launching new offers.

Net spend outlook, out of home activities

Detailed look: health and wellbeing
Expenditure on general health and wellbeing remains highly protected, particularly among younger consumers. This trend is encouraging and signifies an increasingly prevalent focus on health.

Net spend outlook, May 2023, general health & wellbeing
Overall vs. younger consumers (aged 18-35)

Net spend outlook, May 2023, going to the gym
Overall vs. younger consumers (aged 18-35)

Detailed look: travel
Travel spend should remain elevated, particularly among younger individuals and those with higher incomes. Family travel is treated as essential, and staycations appear to be the most favoured option, likely due to the rising popularity of multiple shorter holidays throughout the year. However, there is also resilient demand for air travel, supporting the view that the overall travel sector is performing well within the consumer market.

Net 12-month spend outlook, May 2023, holiday and travel
18-35 years only

Net 12-month spend outlook, May 2023, holiday and travel
Consumers earning over £83k or more

To learn more about CIL’s Consumer Confidence Index or to discuss any of the trends outlined, please get in touch.