Consumer confidence in the UK saw its largest quarterly increase in 18 months according to Deloitte's Consumer Tracker. Five of the six measures that make up the confidence index rose between Q2 and Q3 2016, with strong gains in confidence around job security, opportunities, and career progression. However, confidence in London fell and remains lower than a year ago. Retail sales growth has continued into Q4 2016 supported by low unemployment, inflation, and interest rates. While economic fundamentals remain positive, uncertainties around Brexit and potential higher inflation in 2017 could pose future challenges to consumer spending.

1. The Deloitte Consumer Tracker
Consumer confidence sees its largest increase in 18 months
Overall
consumer
confidence
(q/q)*
Previous
Latest
-8%
-5%
Confidence
in level of
job security
(q/q)*
Previous
Latest
-10%
-4%
Essentials
spending
(q/q)*
Previous
Latest
+5%
+5%
Discretionary
spending
(q/q)*
Previous
Latest
-3%
-2%
ONS retail
sales value
growth
Aug-16 (y/y)
Previous
Latest
+0.9%
+3.9%
CPI inflation
Aug-16 (y/y)
Previous
Latest
0%
+0.6%
Key indicators
*Net balances
Q3 2016

2. Chart 1. Deloitte consumer confidence
Net % of consumers who said their level of confidence has improved in the past three
months
-20%
-15%
-10%
-5%
0%
Q3
16
Q2
16
Q1
16
Q4
15
Q3
15
Q2
15
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Q4
12
Q3
12
Q2
12
Q1
12
Q4
11
Q3
11
In a sign that Brexit fears have been
put to one side Deloitte’s consumer
confidence index rose by three
percentage points quarter-on-
quarter, its largest increase in
18 months.

3. Chart 2. UK consumer sentiment about personal situation
Net % of consumers who said their level of confidence has improved in the past three
months
-50%
-40%
-30%
-20%
-10%
0%
10%
Your children’s education and welfareYour job opportunities/career progression
Your level of debtYour job security
Your general health and wellbeingYour household disposable income
Q3
16
Q2
16
Q1
16
Q4
15
Q3
15
Q2
15
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Q4
12
Q3
12
Q2
12
Q1
12
Q4
11
Q3
11
Five out of the six measures which
make up the confidence index rose
between the second and third
quarters.
There were strong gains in
consumer confidence regarding
job security, job opportunities and
career progression.

4. Chart 3. Consumer confidence in job security
Net % of UK consumers who said their level of confidence in job security has improved
over the past three months
-20%
-10%
0%
Your job security
Q3
16
Q2
16
Q1
16
Q4
15
Q3
15
Q2
15
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Q4
12
Q3
12
Q2
12
Q1
12
Q4
11
Q3
11
-15 -15
-10
-11
-10
-12
-10 -10
-7 -7 -7
-5 -5
-4 -4 -4 -4
-3
-4
-6 -6
The job security index rose by six
percentage points compared to the
last quarter after having fallen for
three consecutive quarters.

5. Chart 4. Consumer confidence by region
Net % of UK consumers who said their level of confidence has improved over the past
three months
-20%
-15%
-10%
-5%
0%
LondonLondon and South East
Midlands and South WestNorth
Q3
16
Q2
16
Q1
16
Q4
15
Q3
15
Q2
15
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Q4
12
Q3
12
Q2
12
Q1
12
Q4
11
Q3
11
Confidence among Londoners fell
by three percentage points this
quarter and is now nine percentage
points lower than it was a year ago.
In the meantime, confidence in the
North is at its highest since the
series began.

6. Chart 5. Consumer confidence in job security by regions
Net % of UK consumers who said their level of confidence in job security has improved
over the past three months
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
LondonLondon and South East
Midlands and South WestNorth
Q3
16
Q2
16
Q1
16
Q4
15
Q3
15
Q2
15
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Q4
12
Q3
12
Q2
12
Q1
12
Q4
11
Q3
11
Londoners were also less
confident about the security of
their jobs.
Given the capital’s dependence
on financial services, a Brexit-
led downturn could weaken its
economy leading to job cuts,
falling house prices and a decline
in business activity.

7. Chart 6. Uncertainty
% CFOs who rate the level of external financial and economic uncertainty facing their
business as above normal, high or very high
Source: Deloitte CFO Survey
45%
55%
65%
75%
85%
95%
Q3
10
Q3
16
Q2
16
Q1
16
Q4
15
Q3
15
Q2
15
Q1
15
Q4
14
Q3
14
Q2
14
Q2
14
Q4
13
Q3
13
Q2
13
Q1
13
Q4
12
Q3
12
Q2
12
Q1
12
Q4
11
Q3
11
Q2
11
Q1
11
Q4
10
Uncertainty among the Chief
Financial Officers of the UK’s largest
corporates remains high post-Brexit.

8. Chart 7. Consumer expenditure
% change y-o-y, final consumption expenditure, constant prices, SA
Source: ONS
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
Q2
16
Q2
15
Q2
14
Q2
13
Q2
12
Q2
11
Q2
10
Q2
09
Q2
08
Q2
07
Q2
06
Londoners were also less
confident about the security of
their jobs.
Given the capital’s dependence
on financial services, a Brexit-
led downturn could weaken its
economy leading to job cuts,
falling house prices and a decline
in business activity.

9. Chart 8. Essentials vs discretionary spending in the last three months
Net % UK consumers spending more by category
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Q3
16
Q2
16
Q1
16
Q4
15
Q3
15
Q2
15
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Q4
12
Q3
12
Q2
12
Q1
12
Q4
11
Q3
11
Essentials Discretionary
However, expenditure continues
to shift from essentials to
discretionary categories. Net
spending on essentials was flat for
the second consecutive quarter,
while net spending on discretionary
categories rose by one percentage
point.

10. Chart 9. Category spending in the last three months
Net % UK consumers spending more by category
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Q3
16
Q2
16
Q1
16
Q4
15
Q3
15
Q2
15
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Q4
12
Q3
12
Q2
12
Q1
12
Q4
11
Q3
11
Retail spending Leisure spending
Moreover, the gap between leisure
and retail spending is narrowing
as consumers continue to favour
spending on experiences such as
holidays rather than on goods.

11. Chart 10. Retail sales
% change in volume and value year-on-year
Value Volume
Aug AugAugAugAugAugAugAugAugAugAug
-4
-2
0
2
4
6
8
10
12
14
1615141312111009080706
The strength of consumer spending
is reflected in the growth of retail
sales since the beginning of 2016,
with a 5.5 per cent rise in the three
months to August 2016 compared
to a year earlier.

12. Chart 11. Inflation
% change year on year
Source: ONS
-4 -2 0 2 4 6 8 10
Food & Non-
alcoholic beverages
Clothing & Footwear
Furniture & Household
equipment
Housing, Water & Fuels
Total inflation
Recreation & Culture
Miscellaneous goods
& Services
Transport
Alcoholic beverages
& Tobacco
Health
Hotels, Cafes
& Restaurants
Communication
Education
15/08/16 15/08/15
4.8
10
4.1
1.1
2.3
1.8
2
1.8
1.4
2.1
1
0.8
0.8
0.7
0.6
0.4
0.4
0.6
-2.6
-2.4
-2.2
--1.2
-2.6
-0.1
-0.9
Inflation remains low across most
categories, with competition
continuing to keep prices down in
the grocery sector.
However, while overall inflation in
August remained flat at 0.6 per cent,
it has been rising since the start of
2016.

13. Chart 12. British pound sterling effective exchange rate index
Sep SepSepSepSepSepSepSepSepSepSepSepSepSepSepSepSepSepSepSep
Source: Bank of England
70
75
80
85
90
95
100
105
110
97 16151413121110090807060504030201009998
UK retailers have seen their costs
rise as a result of the introduction of
the new higher minimum wage and
the fall in the value of sterling.
The key question for retailers is how
much of these increased costs they
will be able to pass on to consumers
while still protecting their margins.

14. Chart 13. % Growth in average wages vs CPI Inflation
% change year-on-year
Aug AugAugAugAugAugAugAugAugAugAug
Source: Thomson Reuters DataStream.
-4
-2
0
2
4
6
8
1615141312111009080706
UK inflation (CPI)Average earnings including bonuses
An extended period of falling prices,
which has enabled consumers to
increase their consumption despite
subdued wage rises, could be
drawing to an end.

15. UK consumer credit – Net unsecured lending to individuals (%y-on-y)
Chart 14. Consumer credit
Secured and unsecured lending to individuals (% change year-on-year)
Source: Thomson Reuters DataStream
Aug AugAugAugAugAugAugAugAugAugAug
-4
-2
0
2
4
6
8
10
12
14
1615141312111009080706
UK personal borrowing: Dwellings – Net lending (%y-on-y) SADJ
Consumer borrowing remains
high as the UK shopper defies
pessimistic post-referendum
forecasts.

16. Chart 15. Unemployment rate
% change year-on-year
Source: Thomson Reuters DataStream
Jun JunJunJunJunJunJunJunJunJunJun
1615141312111009080706
0
2
4
6
8
10
UK LFS: unemployment rate, all, aged 16 & over SADJ
The unemployment rate has
continued to decline and stood at
4.9 per cent in the three months to
June 2016.

17. Chart 16. Category spending over the next three months
Net % UK consumers spending more by category
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Q3
16
Q2
16
Q1
16
Q4
15
Q3
15
Q2
15
Q1
15
Q4
14
Q3
14
Q2
14
Q1
14
Q4
13
Q3
13
Q2
13
Q1
13
Q4
12
Q3
12
Q2
12
Q1
12
Q4
11
Q3
11
Essentials Small-ticket items Big-ticket items
Consumers in our survey expect
to spend more on essentials in the
next three months.

18. Chart 17. Consumer indicators
% change year-on-year
Unemployment
June 15
June 16
5.5%
4.9%
Average weekly earnings growth rate
July 15
July 16
2.9%
2.3%
Interest rates
Sep 15
Sep 16
0.5%
0.25%
With the consumer-focused
economic fundamentals still
showing few signs of a slowdown
since the end of June, we expect
retail sales growth to continue into
the fourth quarter.

19. Chart 18. UK GDP growth: Actual and forecast (%)
Quarter-on-quarter
growth
Year-on-year
growth
Source: ONS, consensus forecasts from The Economist and
Deloitte calculations
20172016201520142013201220112010200920082007
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4 Forecasts
Growth forecasts remain positive
with GDP expected to increase
by 1.7 per cent in 2016, although
slowing to 0.7 per cent in 2017.
Looking further ahead, two events
could pose challenges to consumer
spending power and sentiment: the
prospect of higher inflation and the
start of the formal Brexit process in
2017.

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About this research
The Deloitte Consumer Tracker is based
on a consumer survey carried out by
independent market research agency,
YouGov, on our behalf. This survey
was conducted online with a nationally
representative sample of over 3,000
UK adults aged 18+ between 16 and 19
September 2016.
A note on the methodology
Some of the figures in this research show
the results in the form of a net balance. This
means that in a survey of 100 respondents,
assume that 30 reported they are spending
more, 50 reported no change and 20
reported they are spending less. The net
balance is calculated by subtracting the
number that reported they spent less
from the number that reported they spent
more, i.e. 30 – 20 = 10. This means 10% of
consumers reported that they spent more
rather than less.