Consumer sentiment in the UK is at its strongest level in a year, according to data released today.
Business advisory firm Deloitte‘s Consumer Tracker for the third quarter found that sentiment around the level of disposable income has eased 10 points in the last year, from 43 per cent in the third quarter of 2011 to 33 per cent in Q3 2012.
Last week, grocer Asda‘s Income Tracker found that UK families were £4 better off in September compared with the same month last year, rising for the fourth consecutive month while a decrease in unemployment also reduced pressure on cash-conscious consumers.
Consumer confidence around job security “has helped to underpin the improved sentiment”, according to Deloitte with the number of households to have experienced some income reduction falling by five per cent in the last quarter compared to the same period a year ago.
Similarly, 10 per cent of the 3,000 respondents claimed that a member of their household has started a new job over the period, the highest level this year.
Deloitte‘s Chief Economist Ian Stewart said: “The Consumer Tracker points to a reduction in the stress on the household, with consumers more positive about their income, employment and working hard to balance the books by reducing their levels of debt.
“These shifts in consumer behaviour tie in with the official data that highlights a general improvement in the consumer market.”
Positivity about levels of debt also saw an improvement with only 10 per cent voicing concerns compared with 16 per cent in the same period last year, while defensive behaviour among those choosing to reduce spend lessened.
Bargain hunting has declined nine per cent to 17 per cent while buying less fell to 19 per cent from 25 per cent, though Stewart warned that shoppers are far from a spending spree.
“This brighter outlook is tempered with caution as there is no evidence yet of a significant loosening of the purse strings,” he commented.
“The real test is when we will see a pronounced shift towards greater discretionary spending, especially on big ticket items such as holidays and white goods, and consumers trading up.
“This will be key to whether we see continued growth in consumer spending in 2013.”
In the coming year, utility costs are set to soar with electricity and fuel prices on the rise, with 59 per cent of respondents expecting spend on this to increase.
Higher grocery prices are expected with 78 per cent of consumers anticipating a jump while 42 per cent believe transport costs will rise.
Commenting on the findings, Ben Perkins, Head of Consumer Business Research at Deloitte, said: “While UK consumers are experiencing an increase in real household disposable income, a cautious mindset prevails; we have yet to reach the turning point where defensive behaviours switch to more expansionary ones.
“However, there are signs of an upturn in consumer activity which should lend significant support to UK growth next year.”