Consumer confidence improved at the end of last year but spending is still cautious

Consumer confidence ticked up at the beginning of 2018, but non-essential spending was flat.

The agreement of a Brexit transition deal boosted overall confidence during the first three months of the year, according to Deloitte.

But spending was still heavily weighted towards utilities bills, transport and food and drink. Discretionary spending meanwhile was flat compared to a year ago, as consumers reined in spending on going out and buying big-ticket items like furniture and appliances.

“It remains to be seen to what extent consumers will continue to exercise caution in 2018, and not-too-distant memories of tougher times could yet outweigh consumers’ willingness to spend,” commented Ian Stewart, chief economist at Deloitte.

Researchers suggested that consumer confidence and spending could be lifted by the arrival of warmer weather in the second quarter, as well as the World Cup.

Read more: Retail sales fall on weather hit but department stores provide bright spot

UK consumers are more upbeat on their personal finances, with optimism about disposable income up two per cent since the end of 2017.

But Brits are feeling less confidence about work, as job security optimism declined two per cent.

Stewart added: “Confidence has crept up against a backdrop of consumer-friendly economic conditions. Unemployment has hit a 43 year low and is stoking wage pressures while falling inflation will boost consumer spending power and has eased the pressure for rate rises.”

Ben Perkins, head of consumer business research at Deloitte, said that the depression in spending posed additional challenges to some businesses which are already struggling.

“Consumer business, and in particular the retail and casual dining sectors, have had to face unprecedented challenges over the last year,” he said. “Cautious spending, increased competition and rising labour and rental costs have been the cause for much head scratching across the sector.”

Read more: Consumer spending declines in March