Consumer confidence remained unchanged in the final quarter of 2024, with a marginal -0.2 percentage point drop, according to the latest Deloitte Consumer Tracker based on responses from 3,200 UK consumers aged 18+ between 3 and 6 January 2025.
Sentiment towards personal levels of debt rose by a significant +6 percentage points this quarter compared with Q4 2023. However, the improvement in confidence in debt levels did not compensate for a fall in sentiment towards disposable income with a four percentage points drop to -26%.
Céline Fenech, consumer insight lead at Deloitte, said: “While many consumers appear to be feeling better about paying debts or borrowing following the cuts to interest rates, concerns around disposable income and prices of essentials remain. Consumers continue to look for value and make compromises following a once in a generation surge in costs that has diminished consumers’ spending power. Many consumers continue to compare today’s higher prices to those of pre-pandemic, regardless of the rate of inflation falling.
“While this is the first time since 2022 that confidence has stalled, we expect consumer confidence to continue to recover this year alongside improving economic conditions. For their confidence to improve further, consumers will want to see what happens next to the cost of financing their debts, their ability to save, the prices of essential items and their job security.”
Consumers and CFOs share concerns
Consumer confidence in the state of the UK economy fell significantly in Q4 (-13.6 percentage points), indicating that consumers are nervous about the impact of higher business taxes on their income and prices at the till. The sentiment of senior business leaders also weakened in Q4, as CFOs expect to introduce cost cutting measures in the next 12 months, including the sharpest fall in hiring expectations since the pandemic.
Meanwhile, consumer sentiment towards job security and job/career opportunities also fell in Q4 (-1.0 and -0.8 percentage points, respectively) in a sign that consumers are concerned about the prospects for the jobs market.
Ian Stewart, chief economist at Deloitte, added: “Growth has been more sluggish than expected in recent months and our survey of CFOs shows that finance leaders are feeling less optimistic and are focused on reduced costs. Despite a challenging start to the year, we expect to see growth coming back over the summer, with interest rate cuts, rising real incomes and buoyant government spending helping drive the recovery. For 2025 as a whole we expect UK GDP growth to come in at around 1.0%, a rather better outcome than last year.”
Christmas spending
Two in five (42%) consumers said that they spent more on Christmas expenditure in 2024 than they did on the previous year, in a sign that consumers are loosening their purse strings. This can also be seen in the level of discretionary spending in the last three months, which continued into positive territory following several years of negative growth.
When asked about their Christmas spending, two in five (42%) said they spent more on food and a third (35%) said they spent more on gifts. However, more than half (54%) who spent more this Christmas attribute this to higher prices. Similarly, almost half (44%) of consumers said they had less to spend, signalling that increased expenditure was not necessarily a sign of consumers propensity to spend more.
Two in five consumers (40%) also stated that they did their Christmas shopping before December, which could have been a tactic to spread the cost of the festive season. Over a third agreed that they bought more gifts (37%) on discount including at Black Friday events and more food (43%) using promotions and loyalty cards discounts. One in two (52%) agreed that they were generally more frugal and careful this Christmas, while one in two (50%) agree they consciously cut down on any luxuries.
Oliver Vernon-Harcourt, head of retail at Deloitte, concluded: “As many grapple with an inflation hangover, consumers likely need more time to digest the volatility and uncertainty of the last few years. Consumer recovery this year will depend on what happens with inflation, especially in the more essential categories like food. With our research showing that 80% of consumers still expect prices to go up further in 2025, consumer demand is likely to remain subdued while things settle in the first half of the year.
“Beyond that, with factors such as the rise in the minimum living wage, more public spending, easing monetary and fiscal policies – combined with consumer confidence hopefully continuing to recover – we should see demand improving especially in the more discretionary categories.”
