Consumer confidence hits three year high

Consumer confidence is at its highest level for three years, according to the latest Deloitte Consumer Tracker.

Deloitte has found that consumer confidence regarding their disposable income, levels of debt and job progression has all increased this quarter, and year-on-year increases across five of out of its six measures of confidence were seen this quarter.

Overall confidence is 3 percentage points higher than a year ago and 13 points higher than when the Deloitte Consumer Tracker began in the third quarter of 2011. The biggest rise in positive sentiment was in household disposable income, which improved by seven points year-on-year, from -25 percent in Q3 2013 to -18 percent in Q3 2014.

Consumer demand remains robust, with consumer spending up by 2.1 percent in the first quarter of 2014, with spending on essential items continuing to decline for the third successive quarter, allowing consumers to switch more of their spending to discretionary categories.

Ian Stewart, chief economist at Deloitte, said: “Even without growth in real incomes, consumer confidence has continued to rise. Lower oil prices and commodity prices and a strengthening pound have led to a sharp decline in inflation.

“An improving jobs market and lower inflation have been a real tonic for UK consumers. With inflation on a declining path and earnings heading up, the scene is set for a recovery in real incomes around the turn of the year.”

Ben Perkins, head of consumer business research at Deloitte, added: “Looking ahead to 2015, consumers appear in positive mood as they expect the value of their properties to continue to rise and their levels of debt to fall. The decline in the amount spent on essentials like food and utility bills is also expected to continue. However, with the prospect of higher interest rates, along with a cooling housing market, there are still concerns on the horizon.”