The fall of the pound has finally started to dent consumer confidence in the UK, as new data shows a slump over the last quarter of 2016.
According to accountancy company Deloitte’s Consumer Tracker, consumer confidence dropped to -6 between September and December last year compared to minus five in the prior quarter.
Although essentials spending rose from five to 12 per cent and discretionary spending increased from -2 to zero per cent, confidence in disposable income fell from -12 to -14 per cent.
“The new year sees the arrival of headwinds that may challenge the current consumer-friendly economic conditions,” Deloitte chief economist Ian Stewart said.
“Falling confidence about disposable income may be a sign that we are seeing the start of a squeeze on household incomes.
“Rising inflation, largely driven by the weakening pound in recent months, will also put pressure on real incomes and consumer spending in 2017.”
Despite the pound trading at double digit drops against both the dollar and the euro compared to pre-Brexit levels, most retailers have managed to avoid hiking prices too significantly.
However, inflation rose to a two-and-a-half year high in December.
Job security confidence stayed low at -4 per cent in the quarter, yet workers ages between 18 and 34 showed record sentiment levels.