UK consumers’ confidence in their disposable income has fallen to its lowest level in more than two years, new research reveals.
The latest Consumer Tracker report from Deloitte found that overall consumer confidence fell by one percentage point to -7% in the first quarter of 2017.
Significantly, four out of the six measures which make up the confidence index have seen negative movements in Q1 2017, with inflation rising and discretionary spending falling.
In particular, consumer confidence in disposable income fell by three percentage points to -17% this quarter, its lowest level in more than two years.
Ian Stewart, chief economist at Deloitte, said: “Since last summer’s EU referendum consumer spending has held up well, but with inflation rising and nominal wage growth starting to slow, consumers are beginning to feel a squeeze on their disposable income.
“In March, the rate of inflation stood at 2.3%, above the Bank of England’s 2% target and the highest in more than two years. There are already some signs that these pressures are contributing to a slowdown in consumer activity.”
However, record levels of employment and low interest rates should help the UK avoid a sharp drop in consumer spending, he added.
The Q1 Consumer Tracker also revealed signs of a slowdown in consumer spending. Spending on discretionary items has returned to negative territory, falling by four percentage points to -4% in Q1 2017.
“Rather than catering for all needs and desires, now it is the time for retailers to focus on specialisation, differentiation and innovation, in order to ensure they remain as competitive as possible,” added Bob Perkins, head of consumer research at Deloitte.