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Consumers and the Economic Outlook: Quarterly Update - UK - September 2016

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Published Date : Sep 2016

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For the UK, the EU referendum is one of the defining moments of the 21st Century so far, with long-term implications that will rival events as seismic as the financial crisis. The truth is, though, that this early in the process there has been little direct impact on most people’s financial situation. 

This comes through strongly in Mintel’s consumer confidence data. There was a post-vote dip in sentiment, but by late August most of the losses had been recovered. Spending plans have held up well, even in vulnerable areas, such as big-ticket purchases and spending on the home. Brexit will inevitably have an impact on consumer behaviour – but it’s likely to be 2017 until even the early effects start to feed through into spending.” 

Table of contents

Consumer sentiment
Sentiment was hit post-vote, but rebounded in August
84% say that they’re either “confident”, or that they’re “concerned but should be fine”
Possibility of a hit to spending on the home
The economic environment
A campaign fought on economic territory
Early macro-economic indicators suggest no immediate crisis…
…but two months is far too early for the full effects to be felt
Key economic indicators
Figure 1: Key economic indicators, August 2016

What you need to know
Macro-economic expectations
Consumers expect the worst for the UK…
Figure 2: Consumer views on the impact of the EU Referendum on the UK economy, July 2016
…with the cost of living being a particular concern
Will the income squeeze return?
Personal expectations
People are much less negative about their own finances
Figure 3: Consumer views on the impact of the EU Referendum on their own finances, July 2016
Regional and demographic differences
A complex regional split
Younger people fear for the impact on their own finances
Figure 4: Expected impact of the EU vote on respondents’ career prospects, by age, July 2016
Financial vulnerability shapes people’s Brexit expectations
Figure 5: Expected impact of the EU vote on respondents’ household income, by current financial situation, July 2016

What you need to know
Sentiment was shaken by the Brexit vote, but has recovered
Figure 6: “How would you generally describe your financial situation at the moment?”, August 2016
Figure 7: The financial wellbeing index, February 2009-August 2016
A vote for change?

What you need to know
A quarter of people say their finances have improved over the last year
Figure 8: “How would you describe your finances compared to a year ago?”, August 2016
Figure 9: The recovery index, July 2011-August 2016
A generation gap: Older workers are feeling the squeeze
The short-term outlook for consumer incomes looks positive…
Figure 10: Average wage growth and consumer price inflation, 2007-16
…but long term, prices are bound to be affected by Brexit

What you need to know
Confidence rebounded strongly in August
Figure 11: “And how do you feel about your financial situation over the next year or so?”, August 2016
Figure 12: The financial confidence index, January 2009-August 2016
The uncertainty is over…for now, at least
Retirees are the most optimistic

What you need to know
Spending patterns have remained steady post Brexit-vote
Figure 13: “Thinking about how you spend your money, which of the following have you done over the last three months? And which do you plan to do over the next three months?”, August 2016
The income divide: It’s still high earners who are driving spend
Figure 14: The financial activity index, June 2012-August 2016

Financial services
Uncertainty could feed through into borrowing and saving choices
An easing of growth in the mortgage market
Further falls on interest rates hit saver…
…but for many, saving is about emotion, not financial returns
Figure 15: Level of savings and investments, August 2016
Brexit could be particularly damaging for those approaching retirement
Regulatory perspective
What it means
Grocery retailing
Intense competition will mitigate some of the impact of the falling pound
Figure 16: Consumer price inflation, overall index and food and drink categories, June 2014-June 2016
Any changes to legislation will have an impact on costs
Convenience has been the key driver in recent years
Upheaval creates new opportunities
What it means
No immediate sign of a fall in spending intentions
Exchange rates will have a major effect on an import-heavy market…
…but they’ll also support overseas income
On-shoring some manufacturing would play to the move to fast fashion
What it means
Beauty and personal care
The “lipstick effect” underpins spend in tough times…
…although some sectors are vulnerable to trading down
Luxury BPC brands should benefit from a weaker pound
Little possibility of legislative disruption
What it means
Little short-term reason to change food shopping behaviour…
…but the weakening pound poses threat of rising food prices
Continued savvy shopping on the cards
Marked uncertainty looms over the long term
What it means
Alcoholic drinks
No sign of people cutting back on nights out
A very different alcoholic drinks market
What it means
In the short-term, the weak pound could curb spending abroad
If airlines can keep fares low, this could stimulate spending
A shift in holiday destinations – both inbound and outbound
Long term – It’s crucial that the UK keeps the EU’s ‘Open Sky’ terms
What it means
Spending on the home
2015 was a strong year for spending on the home…
…but Brexit could well disrupt plans
Big ticket purchases will be affected most
Weaker pound will push up costs of goods in the medium term
What it means
The industry is starting from a position of strength
Consumer confidence is key to the sector
Longer-term prospects are tied to the strength of the economy
What it means

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