CONSUMER CONFIDENCE HOLDS STEADY IN SCOTLAND
Scottish consumer confidence remained steady at -11% in the fourth quarter of 2021, in line with the rest of the UK, which experienced a drop of 1% over the same period.
Overall personal expenditure in the final quarter increased for 45% of consumers in Scotland, up from 37% in the third quarter, according to the latest Deloitte Consumer Tracker. Of these, 68% revealed it was due to rising prices.
The tracker is based on a survey carried out online by YouGov with a nationally-representative sample of 3,177 UK adults. Overall consumer confidence is calculated as an aggregate of six individual measures: job security, job opportunities, household disposable income, level of debt, children’s education and welfare, general health and wellbeing.
Of these seven measures, sentiment around the state of the economy dropped 7% points in the fourth quarter. This fall in sentiment among consumers is in contrast to business executives across the UK, who intends to make increased capital investment a priority for the year ahead.
Céline Fenech, consumer insights lead at Deloitte, said: “The expected squeeze on spending power and higher inflation may still dent the hopes of a consumer recovery, however some consumers are in the fortunate position of having higher levels of savings compared to before the pandemic; indicating some financial resilience.
The further easing of restrictions should also support an improvement in sentiment, in turn boosting spending – but this may not occur until inflation has peaked so the critical question in the meantime is whether consumers can afford to continue spending.”
While businesses have faced significant recruitment difficulties over the last three months, a sustained ‘candidates’ market’ means many consumers remain optimistic about their own job prospects.
The latest data suggests Scottish consumers are currently more confident than their UK counterparts when it comes to job opportunities and career progression, with growth of 8% from the third quarter, in comparison to the 1% growth seen by the rest of the UK in the fourth quarter.
Ian Stewart, chief economist at Deloitte, explained: “A strong recovery in activity as lockdown restrictions eased has ensured most furloughed workers have been able to return to the workforce.
At the same time, the ratio of unemployed people to vacancies sits at a record low meaning, theoretically at least, there is a job available for almost every person out of work.”
Scottish consumers indicated that their intended spending on discretionary items will fall by 10% in the first quarter of 2022. This is more pronounced in social categories, including going out and eating at restaurants, down -20 and -14 percentage points respectively.
While overall spending on essential goods and services will increase by 2% in the first quarter, Scottish consumers expect utility bill expenditure specifically to increase by 8%, quarter-on-quarter.
Gavin Hood, advisory corporate finance partner at Deloitte in Scotland, said: “The extent to which consumer finances come under pressure in the months ahead will determine the speed of recovery.
The hospitality and leisure sector has been one of the hardest-hit throughout the pandemic, with the normally busy festive period punctured by cancellations over Omicron fears.”
He added: “With consumers eager to see a return to restaurants and holidays, the hospitality and leisure sector will welcome the recent lifting of most restrictions, which have already unlocked some of the pent-up demand for services.”