Partner Article

North East consumer confidence below national average as concerns remain

North East consumer confidence has fallen two percentage points and is significantly below the national average, according to the latest Deloitte Consumer Tracker.

Consumer confidence nationally is at its highest level for three years as overall confidence is three percentage points higher than a year ago and 13 points higher than when the tracker began in Q3 2011.

Moreover, the biggest rise in national positive sentiment was in household disposable income, which improved by 7 points year-on-year (from -25% in Q3 2013 to -18% in Q3 2014).

Inn the North East it had fallen one percentage point year-on-year and was at its most positive last quarter.

However since the tracker began positive sentiment in household disposable income has increased by 20 percentage points.

Spending on essential items declined for the third successive quarter, allowing consumers to switch more of their spending to discretionary items. Significantly, net spending on holidays moved into positive territory for the first time since the Consumer Tracker began (from -15% in Q3 2011 to 4% in Q3 2014).

Comparatively, North East net spending on holidays remained positive for the second consecutive quarter with an increase of one percentage point and since the tracker began it has risen 36 percentage points (from -31% in Q3 2011 to 5% in Q3 2014).

A strong job market has boosted confidence, with fewer consumers suffering a reduction or loss of income in Q3 2014 compared to last year (down from 12% in Q3 2013 to 11% in Q3 2014).

This confidence appears to be long term, with 20% of consumers expecting an increase in their income in 2015, compared to just 11% who expect a decrease.

This national sentiment is not felt in the North East, as more consumers are suffering a reduction in or loss of income with an increase from 6% in Q£ 2013 to 15% in Q3 2014.

Senior partner and consumer business expert at Deloitte in the North East, Paul Feechan, said: “Increasing competition between the grocers, combined with lower commodity prices, have driven deflation in the food market, which has allowed customers to spend less on essentials.

“This leaves more in peoples’ pockets to spend on non-essentials like holidays, eating out and furniture.

“Looking ahead to 2015, consumers nationally 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 and an unstable job market in the North East, there are still concerns on the horizon.”

Chief economist at Deloitte, Ian Stewart, 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.”

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