UK: Deloitte Monday Briefing: Signs Of Life From The UK Consumer

Last Updated: 23 October 2012
Article by Ian Stewart

Most Read Contributor in UK, August 2017

* Amid the economic gloom the UK consumer is showing signs of life. Last week the Office for National Statistics reported that UK retail sales grew in the third quarter at the fastest pace in more than two years.

* A number of other indicators also suggest that the consumer recession is drawing to an end.

* Household spending has since shown modest growth this year after falling sharply at the tail end of last year. New car sales have picked up in recent months. And consumer confidence hit a 15-month high in September.

* Two factors have come to the rescue of a battered consumer sector.

* First, lower inflation has reduced the squeeze on real incomes. Last month CPI inflation fell to its lowest level in almost three years and less than a half the rate of a year ago. Lower inflation has boosted consumer spending power.

* Second, an unexpectedly resilient labour market has kept unemployment below the peaks seen in the much milder recessions of the early '80s and early '90s. Latest figures show a surprise fall in the unemployment rate with the number of people in employment rising to a record high.

* One yardstick for gauging consumer conditions is the so-called misery index calculated by summing a country's inflation and unemployment rates. The UK misery index is now at its lowest level since 2009.

* The changing mood is reflected in the findings of the latest Deloitte Consumer Tracker, a quarterly survey of 3,000 consumers conducted by our colleagues in Deloitte's Consumer Business team.

* The Tracker shows that UK consumers have become more positive about the outlook for jobs and spending power. Stress in the consumer sector has eased, with fewer shoppers trading down to cheaper brands, bargain hunting or cutting spending.

* Yet risks lie ahead. Utility and food bills are on the rise again and, while the labour market has held up well, many of the new jobs being created are temporary of part time. The Consumer Tracker shows that consumers remain cautious, worried about rising prices and focussed on paying down debts and build up their savings.

* Much depends on inflation. Our hunch is that high inflation, rather than a weak jobs market or cuts in public spending, has been the single biggest problem for UK consumers. If UK inflation is, finally, heading down, better times should lie ahead for consumers. For now the UK consumer looks on course for a weak recovery in 2013.

MARKETS & NEWS

The FTSE ended the week up 1.7%, hitting a 7-month high on Thursday.

The following news stories caught our eye. We think they reflect noteworthy themes:

KEY THEMES

* EU leaders agreed to set up a single banking supervisor for the eurozone in their first step towards a banking union – banking union

* Portugal announced a new budget which includes cutting government spending by €1bn and further tax rises worth €4bn – austerity

* China's GDP grew by 7.4% year-on-year in the third quarter, the slowest pace since early 2009 – China cooling

* Card transactions provider MasterCard has begun analysing data to help marketers deliver targeted advertising to consumers – targeted marketing

* Trading in Google shares was suspended for more than 2 hours after it released its disappointing third-quarter results early by mistake – market glitches

* 80-year-old US current affairs magazine Newsweek is to end its print edition, becoming an online-only publication – digital revolution

* French bank Credit Agricole sold its Greek banking arm Emporiki for a symbolic €1 to rival Alpha Bank – Greek banks

* French bank Societe Generale has also agreed to sell its Greek arm Geniki for €1m – Greek banks

* US new-home starts hit a four-year high in September – US housing recovery

* Bank of Scotland was fined £4.2m by the FSA for failing to keep accurate records of the mortgage payments of 250,000 Halifax customers – greater oversight

* Softbank, a Japanese telecoms company, agreed to buy a 70% stake in Sprint Nextel, America's third-biggest wireless carrier – M&A

* Exxon Mobil is to take over Canadian oil and gas company Celtic Exploration in a $3.1bn deal for greater access to shale gas formations – shale

* Royal Bank of Scotland exited the British Treasury's asset protection scheme, an important step towards full private ownership – recovery

* Ukraine is to ban wheat exports from mid-November in response to a sharp rise in agricultural commodity prices this summer – commodity prices

* 97,000 cars were stolen in the UK in 2011, just a quarter of the number stolen in 1997, partly reflecting the effectiveness of engine immobilisers and central locking – technology fixes

* Median property prices in Berlin have risen by 20% in the last year – cheap housing

* The Economist reports that US free market philosopher Ayn Rand's books outsell Karl Marx's 16-fold – market pressures

* Two brothers from central New York waited for 6 years before claiming a $5 million lottery prize in order to plan their use of the prize money – winner's curse

* A survey by the BBC found that at £3.90 a piece football club Fulham sell the most expensive pies in the English Premier League while Manchester United and Manchester City sell the most expensive tea at £2.50 per cup – Pie Price League

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