Consumer confidence stalls in 2024’s golden quarter

Consumer confidence remained unchanged in the final quarter of 2024, with a marginal 0.2 percentage point drop, while feelings about the state of the UK economy worsened with a 14 percentage point drop.

That’s according to the latest Deloitte Consumer Tracker for Q4 2024, based on the responses of 3,200 UK consumers aged 18-plus between 3-6 January 2025.

Consumer sentiments towards personal levels of debt rose by a significant six percentage points compared with Q3 2023. However, there was still a 4 percentage point drop to -26% in confidence in household disposable income.

That was perhaps unsurprising given 42% of consumers say they spent more on overall Christmas expenditure in 2024 compared to the previous year, with over half (54%) attributing that to higher prices.

Additionally, 44% of consumers said they had less to spend for Christmas, signalling that increased expenditure was "not necessarily a sign of consumers propensity to spend more".

As was largely predicted, a significant proportion of consumers (40%) also stated that they did their Christmas shopping before December, 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 card discounts.

Just over half of consumers (52%) agreed that they were generally more frugal and careful this Christmas, while 50% said they consciously cut down on any luxuries.

Oliver Vernon-Harcourt, Head of Retail at Deloitte, said: "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."

While growth has stalled in recent months, there is some optimism that things will begin to pick up towards the second half of 2025.

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."

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%, a rather better outcome than last year."