Consumer confidence outlook

Deloitte continues to measure consumer confidence using a broad index that includes disposable income, debt levels, job security, career opportunities, health and wellbeing, and children's education and welfare. After recovering from the economic disruption caused by the pandemic, consumer confidence has remained mixed throughout 2024. While falling inflation and improving wage growth have helped boost optimism, many households remain cautious due to the higher cost of living and elevated interest rates. As a result, confidence has improved gradually but remains below pre-pandemic levels.

The drivers of consumer confidence

Consumer confidence remains one of the most important indicators of spending behaviour because it influences the purchasing decisions of millions of UK consumers. In 2024, declining inflation, stronger wage growth, and a relatively resilient labour market have provided some reassurance. However, high mortgage costs, persistent household bills, global conflicts, and ongoing economic uncertainty continue to affect confidence. Many consumers remain concerned about their financial security and future spending power, encouraging them to prioritise saving and essential purchases.

The consequences

Consumer confidence affects both everyday spending and larger financial commitments. Households remain cautious when making significant purchases such as cars, home improvements, holidays, and property because higher borrowing costs have made credit more expensive. Consumers have also become increasingly value-conscious when shopping for essentials, often choosing supermarket own-brand products, taking advantage of discounts, and comparing prices across retailers. Although spending has stabilised compared with previous years, many households continue to manage their budgets carefully.

Sectors bucking the trend

Despite continued financial pressures, some sectors have shown strong growth. Spending on travel, hospitality, restaurants, and entertainment has remained resilient as many consumers continue to prioritise experiences over material possessions. Retailers offering good value, loyalty rewards, or premium experiences have generally outperformed those focused on discretionary goods alone. This suggests that while consumers remain cautious overall, they are still willing to spend on activities that provide enjoyment and memorable experiences.