While inflation, ongoing concern over supply chains and empty shelves caused a slight decline in optimism, consumer confidence was +3 on the index as sentiment remained positive, with more respondents thinking they would be better off in the next 12 months than worse off.
Sentiment is now at the same level recorded in December 2019, the last survey before the pandemic. PwC said that while it’s at the lowest level seen in 2021, confidence was still higher than at any point between the 2016-19 period following the EU referendum.
In June, every demographic group and region was net positive for the first time ever. Now, sentiment is in decline in almost every age category, region, and demographic. PwC said that many of these were slight declines, but it’s been “enough to push several groups into negative territory”.
Sentiment amongst older age groups declined “most significantly”, with all the over 45s in negative numbers, and 55 – 64s now the least optimistic group at -11 net. Under 45s remained largely positive however, with 25-34 year olds being the only demographic group to have maintained sentiment.
Whilst under 25s are still the most optimistic age group, sentiment has reportedly fallen fastest among them, amid the end of furlough and fewer job opportunities for graduates.
Around half of those surveyed experienced either grocery price inflation or utility/petrol price inflation, and a similar number expect inflation to continue over the coming months. PwC noted its survey was conducted before the failure of several large utility companies and current petrol shortages, so this figure would likely be even higher if the survey was taken now.
In addition, the majority of respondents witnessed empty shelves at supermarkets, and indicated that they are only expecting out-of-stocks to get worse as Christmas approaches.
Lisa Hooker, consumer markets lead at PwC, said: “It’s little surprise that consumer sentiment has not maintained the record levels we saw earlier in the year. But with confidence stronger than last year – and for most of the post-referendum period – it’s not all bad news.
“But the general positivity must come with a warning. The inflationary factors that have triggered the decline in sentiment are unlikely to ease in the short term, particularly for grocery, utilities and petrol. Combined with the current problems facing those industries in relation to supply, we’re beginning to see it affecting consumers’ day-to-day lives and, in turn, sentiment and demand.”
She added: “For both retail and leisure sectors, the timing couldn’t be worse. After the disappointment of last year, retailers and hospitality operators desperately need a strong run up to Christmas. Even without lockdowns, they will need to convince consumers to part with savings to have any hope of recovering to pre-pandemic levels.
“For many, the coming weeks will be make or break: can the driver shortages be addressed and supply chain pressures eased? When will the crisis at the petrol pumps be resolved? And will higher energy prices cause more widespread inflationary pressures and a reluctance from consumers to spend?”