Consumer confidence falls for the first time in 12 months

The Deloitte Consumer Tracker recorded a net balance in consumer confidence of -11%, down on -8% in the third quarter.

Deloitte said the fall highlighted the “uneven nature” of the recovery.

Deloitte chief economist Ian Stewart said: “In a sign of the headwinds facing the consumer sector, the number of pessimists continues to outnumber the optimists across all measures of confidence in our survey. Weak wage growth in particular is still putting pressure on household budgets. Recent gains in consumer spending have been largely fuelled by people dipping into their savings, higher levels of borrowing and lower inflation, rather than an increase in real disposable income.

But Stewart was optimistic about the fall. He said: “We think this is a setback rather than a longer-term, underlying decline in confidence. Consumer sentiment is higher than it was a year ago and an accelerating economy and lower inflation should bolster consumer incomes in 2014.”

Deloitte said falling inflation helped cut downward pressure on discretionary spending. The Tracker revealed that consumers are spending more on going out, clothing and electricals compared with the fourth quarter in 2012.

More consumers are also planning to make major purchases in early 2014, such as property and big-ticket electricals. 

Deloitte head of consumer business research Ben Perkins said: “Consumers are being selective, trading down in some categories, in order to be able to trade up in others. We saw this over the Christmas period as people bought value ranges in some product areas, so that they could treat themselves and purchase a few premium items in their preferred categories.”