Consumer confidence Is up despite economic slowdown

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Despite the economic slowdown, consumer confidence is up on mid-2023 levels due to rising wages and consumers' adaptation to constant upheaval, including the impact of COVID-19 and the cost of living crisis.

According to new Mintel research, only 11% of consumers expect the economy to grow significantly, compared to 38% who think it’ll stay about the same.

Ever since mid-2023, average wages have been edging ahead of the inflation rate, meaning that people finally have a little bit more slack in their budget.

Toby Clark, Director of EMEA Research at Mintel, added: "In the real world, a 0.3% decline isn’t going to feel any different than a 0.3% increase. What really matters is how much money you’ve got left in your bank account at the end of the month."

  • Despite the fall in national economic activity over the second half of 2023, 28% of consumers say that their finances are healthy, and 44% that they’re at least doing OK. 
  • 21% of people with a household income of less than £15,500 are either struggling or already in financial trouble, compared to just 2% of people earning at least £50,000.
  • Mintel's January data shows a fall in sentiment, but it's similar to a similar post-Christmas dip in 2021 and 2022.
  • The medium-term trend, though, is broadly positive, and sentiment ended 2023 higher than at any point since mid-2022.
  • In response to rising prices, 34% are shopping more at low-cost retailers, while 32% are shifting to private labels, and 43% are being more careful about spending on luxuries.

What does this mean for the retail sector?

  • Consumers are attempting to minimise the impact by cutting back on luxuries, and switching to private label or lower-cost retailers.
  • News of a technical recession won't significantly shift consumer behaviour in the retail sector.
  • Christmas 2023 hints at how polarised any improvement in retail spending will be in 2024. Average spending on gifting fell 5% year-on-year, and gift spending for mid-income households (£25k-£49.9k), dipped by 14%.
  • High income shoppers grew spend (+11% y-o-y), with more purchasing in high ticket categories like electricals, jewellery and watches.

Nick Carroll, Category Director – Retail Insights at Mintel, added: "The hope is further easing of inflation and continued wage growth will allow finances additional time to recover, and that in the second half of the year we may see a broader range of consumers’ act in the way we saw a proportion of high earners do during Christmas 2023, upping discretionary spend and releasing the purse strings a little."

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