Cautious Optimism From Consumers in the Run-up to Christmas, PwC Survey Finds

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The FINANCIAL — Just over a quarter of retail consumers think they will be better off in the next 12 months- marginally higher than the proportion who think they will be worse off.

2,000 adults aged 18 to over 65 were surveyed in September as part of PwC’s tracker of consumer sentiment, now in its 10th year.

Although not as optimistic as in late 2015 and early 2016, this shows an improvement in sentiment compared with last year and the beginning of 2018, which reflects the continued low levels of unemployment and the highest wage growth in almost a decade.

Comparing today’s sentiment with the situation 10 years ago, at the lowest point in October 2008, 62% of adults thought they would be worse off, and only 12% better off.

Currently, more than half of all 25-34 year olds think their households are better off than they were 10 years ago, the survey found.

The age group which thinks that they will be worst off on balance are the Baby Boomers (55-64 year olds). Baby Boomers are now consistently the most pessimistic cohort in our survey, whereas the over 65’s are no longer as negative about their prospects as they have been in the past.

“Although not as optimistic as in late 2015 and early 2016, our latest survey shows an improvement in sentiment compared with 2017 and the beginning of 2018″, Lisa Hooker, consumer markets leader at PwC, said.

“Despite the recent negative indicators, both politically and economically, this may be a sign that consumer spending is more resilient than some observers expect, potentially buoyed by low unemployment and relatively high wage growth.

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“In the critical run-up to Christmas, the cautiously optimistic consumer could represent a major boost for high street retailers already facing headwinds generated by increased online competition, business rates and Brexit-related costs.”

In the ten years of its existence PwC’s Consumer Sentiment Tracker has provided a useful indicator of future consumer spending patterns, predicting both the slowdowns in 2009 and 2011, and the relative rally in 2015-16.

Between 2008 and the present day, age is the most significant indicator of consumer sentiment, with younger people the most optimistic, reflecting their entry into the jobs market and expectations for advancement and earnings growth, as well as the fact that many may still live at home and may be unencumbered by mortgages or family responsibilities.

On the regional front, variations were more pronounced a decade ago. However, the initial North-South divide has dissipated, and, while there is variation between regions from survey to survey, they tend to iron themselves out over the course of a year, PwC says.

“Asking consumers how they felt their household situation had changed since 2008, and how they thought their fortunes would evolve in 10 years’ time generated some compelling results”, Kien Tan, retail director at PwC, said.

“Interestingly, the two cohorts most positive about their historical fortunes are Pensioners and Millennials; indeed, over half of 25-34 year olds think they are better off today than they were 10 years ago, and fewer than a quarter think they are worse off. The only age group which thinks it is worse off on balance than in 2008 are the Baby Boomers (55-64 year olds).

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“Looking forward, the younger the respondent, the more optimistic their outlook. Younger people, in fact all age groups under 45, think they will be better off on balance in 10 years’ time, with only over 55s consistently negative.”


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