Consumer confidence falls as cost pressures mount

Shoppers are already showing signs of putting off big purchases, and that trend is likely to continue, a study by Deloitte found.

Deloitte’s study of 3,000 consumers showed that confidence fell to -7% in the first quarter of 2017, down from -6% in the final quarter of last year.

However, confidence was still said to be “broadly in line with the three-year average”.

Deloitte chief economist Ian Stewart said: “Since last summer’s EU referendum, consumer spending has held up well, but with inflation rising and nominal wage growth starting to slow, consumers are beginning to feel a squeeze on their disposable income.

“In March, the rate of inflation stood at 2.3%, above the Bank of England’s 2% target and the highest in more than two years. There are already some signs that these pressures are contributing to a slowdown in consumer activity.

“Record levels of employment and low interest rates should help the UK avoid a sharp drop in consumer spending.”

Less disposable income

The report showed some signs of a slowdown in consumer spending.

Deloitte head of consumer research Ben Perkins said: “With less disposable income, consumers will have to consider whether to trade down, buy less or borrow more.

“Consumers are already showing signs of moving away from making major purchases, and this is a trend that is likely to continue.

“Retailers and other consumer businesses will need to think carefully about their offerings to ensure they are targeting the right products and services to the right customers.

“Rather than catering for all needs and desires, now it is the time for retailers to focus on specialisation, differentiation and innovation in order to ensure they remain as competitive as possible.”