Yahoo Finance UK roadmap out of lockdown fuels record rebound in consumer confidence
UK consumer confidence jumped to record highs in the first three months of the year, boosted by the roadmap out of lockdown following months of staying at home, a new research says.
The latest quarterly Deloitte Consumer Tracker revealed confidence rose six percentage points in the first quarter to -11% — the fastest rate of quarterly growth in the tracker’s ten-year history.
Deloitte's analysis shows every measure of confidence saw both year-on-year and quarter-on-quarter growth.
After starting 2021 under lockdown restrictions, the reopening of schools helped bolster sentiment around children’s education and welfare to -11%, up six percentage points on the previous quarter.
Reflecting consumer eagerness to spend, "going to a shop" topped the list of leisure activities people are most likely to do post-lockdown, with 63% saying they’d plan to return within a month of measures lifting.
It comes after new data from the Office for National Statistics (ONS) released on Friday, showed retail sales rebounded to 5.4% in March, compared to February as coronavirus restrictions began to ease.
Sales increased 1.6% in the year to March, but they decreased over the quarter to March due the latest lockdown. Sales volumes in the first quarter of 2021 fell 5.6%.
Analysts think that despite the positive outlook for the retail industry as spending increases, working from home measures will keep pressure on the sector.
"Although 12 April marked what many hope will be the permanent reopening of non-essential retail stores, mass remote working will continue to impact footfall on the High Street," said Ben Perkins, head of consumer research at Deloitte.
Coupled with the UK’s speedy COVID vaccination rollout, sentiment around health and wellbeing improved eight percentage points to -26%. This was the highest level since the start of the pandemic.
With restaurants and physical non-essential shops remaining closed in Q1 2021, consumers’ pockets improved in the quarter.
Household disposable income saw a seven percentage point boost to -10%, marking a 17 percentage point improvement compared to the same period in 2020.
Meanwhile, consumers’ confidence in their level of debt has tipped over to the black, at 1%, for the first time in a decade.
Britain is "primed for a sharp snap back in consumer activity," said Ian Stewart, chief economist at Deloitte.
"High levels of saving, the successful vaccination rollout and the easing of the lockdown set the stage for a surge in spending over the coming months."
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The state of the economy sentiment surged 12 percentage points to -61% from Q4 last year as lockdown measures eased.
On Friday, closely-watched private sector numbers revealed Britain's economy was rebounding at the fastest pace rate since April 2013, according to IHS Markit's purchasing managers' index (PMI) data.
Additionally most of the 3,000 respondents indicated they were optimistic about both their job security as well as opportunities and career progression, each up by six and seven percentage points, respectively.
"The eventual peak in unemployment looks set to be far lower than had been feared, and far lower than following any downturn in the last 30 years. With employers anticipating a return to the office by Q3 2021 life should start returning to something which, though far from normal, is closer to it," Stewart said.
But, he warned despite the upbeat outlook "we’re not completely out of the woods" with the emergence of new vaccine resistant variants and a rising global coronavirus infections.
READ MORE: UK economic recovery from COVID second wave already underway
Consumers are also looking to get away, with spend on holidays up seven percentage points this quarter, to -31%.
In a sign that consumers are preparing for further lockdown easing, discretionary spending grew this quarter by one percentage point.
While net spending in most discretionary categories remain below in comparison to 2020, there was strong quarterly growth in demand for holidays and categories related to socialising, such as eating and going out.
"Whilst international travel for leisure remains restricted for now, consumers are still keen for some time off. Many will have accumulated vouchers from cancelled trips in 2020 and will be looking to rebook whilst they remain valid. For others, ‘staycationing’ offers another chance this summer to explore new areas around the UK," said Simon Oaten, partner for hospitality and leisure at Deloitte.
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