Consumer Sentiment Survey - Spring 2022

A prolonged drop-off in consumer sentiment sees consumers tighten wallets and the divergence between demographic groups grow.

A significant and sustained drop-off in consumer sentiment has led to the biggest one-year decline in confidence since the global financial crisis. With inflation driving a growing divergence between demographic groups, the cost of living crisis sees post-pandemic pent-up demand in discretionary spending all but evaporate. We look at what these findings might mean for consumer-facing businesses over the coming months.

Record decline in consumer sentiment

What a difference a year makes. In March 2021, our Spring Consumer Sentiment showed the highest levels of consumer confidence since our survey began in 2008, with improvements across every age group and demographic. We even saw upturned category spending intentions, as discretionary categories - including leisure, pleasure and fashion - were prioritised over grocery and the home.

Exactly two years after the first nationwide lockdown caused the biggest quarterly drop in sentiment in our survey’s history (to -26), sentiment has tumbled again. Now at -20, it’s almost as low as it was back then. 

Run across the weekend of 17-20 March, our survey shows the real impact that the cost of living crisis is having across the UK. While the findings came before the Chancellor’s Spring Statement, which may have brought some amelioration in the form of higher National Insurance thresholds and temporary fuel tax reduction, it’s unlikely to have had much of a positive impact on confidence for those most affected.

Looking at a more long term trend, the slide in consumer sentiment has been rapid. Sentiment peaked last summer (at +10), and has steadily slid away. A 30-point drop in just nine months is the biggest sustained decline in our survey since the 2008 Global Financial Crisis.

Despite that significant, sustained decline, sentiment remains above three historic lows: the start of the pandemic (-26), the Lehman Brothers collapse in 2008 (-51), and the post-recession austerity period (-42).

Divergence of different demographics

Traditionally, we see consistent patterns in sentiment between different demographic groups.

Younger people are more optimistic, typically because they’re entering the workforce or progressing their careers. Older people tend to be more pessimistic as their income plateaus or they think about retirement, and maybe because they have lived through times of higher inflation. We see less variation and more survey-to-survey volatility between regions and socio-economic groups, with key outliers including London (more optimistic because of a younger population) and the lowest ‘E’ socioeconomic group (historically, less optimistic due to dependence on benefits, and with the additional impact of rising food and utilities costs becoming a greater proportion of their income).

At the start of the pandemic, different demographic groups and regions in the UK converged, as lockdown and economic uncertainty affected all equally. This started to diverge during the pandemic. The oldest age groups saw relative sentiment improve dramatically, particularly during the vaccine rollout, with a pronounced ‘vaccine effect’ influencing sentiment in the first half of 2021. Higher socio-economic groups, particularly the ‘AB’ group (professionals), saw sentiment soar in 2021. They benefited the most from lockdown savings (estimated to be a total of around £180bn) through a combination of working from home, cancelled holidays and reduced leisure spending during lockdowns.

But this time, while sentiment has fallen across almost every demographic group, the gap between the most and least optimistic is wider than ever. 

Under 35s remain net positive, being the most likely to benefit from high employment and National Living Wage increases, while middle and older age groups have seen sentiment fall faster. That has led to the largest gap in recent times between the most optimistic (18-24 at +23) and the least optimistic age groups (55-64 at -49).

There have also been significant drop-offs among all levels of affluence, except the professional classes, which remained stable at -5. As the group with the most lockdown savings, they have the greatest financial resilience to the current cost-of-living pressures.

Consumer confidence evaporates in the face of inflation

While personal circumstances must be considered, the single biggest driver - and differences - in the reduction of sentiment is the cost of living crisis, expected to be the worst contraction in disposable income since records began.

Consumers have started to feel the pinch of inflation as it filters through, and are expecting worse. Three quarters told us they had seen their grocery shopping become more expensive in the past few months, and 78% expect prices will rise further in the coming months. They fear the same for their utilities -  two-thirds are already spending more, with 77% expecting further rises. Just 4% of all consumers do not expect to increase spending on either groceries, utilities or petrol in the coming months.

Those expectations around inflation are linked to concerns about disposable income and worse sentiment. Younger age groups, for instance, are less likely to expect inflation to affect them, many because they will be living at home or not responsible for those bills. 

“This shift in sentiment is both significant and sudden, with consumer spending expectations moving towards more essential areas at the expense of discretionary items. Businesses that help customers by offering them the options to trade down are more likely to keep their loyalty for when things get better.”

Lisa Hooker, Leader of Industry for Consumer Markets, PwC UK

Help consumers now to help yourself later

Consumers are facing a cost-of-living crisis. The reversal in sentiment has been sudden and driven by inflation. While some businesses may be tempted to target post-lockdown ‘revenge spending’ and conspicuous consumption, this is unlikely to be the right tone now, given that everybody will be affected to some extent by financial pressures. 

Successful businesses will not only acknowledge that people are feeling the pinch but offer ways to help them mitigate the challenges. Consumers are more likely to remember and reward those businesses that helped them through the biggest squeeze in disposable income in more than a generation. 

There are actions that retailers and hospitality operators can take to help consumers while also protecting themselves.

About the research 

1. PwC’s latest consumer sentiment survey was conducted between 18-21 March 2022 and includes responses from a nationally representative sample of 2,007 adults.

2. PwC has asked the same question every few months since April 2008: “Thinking about your disposable income (money remaining after household bills, credit cards, etc.), in the next 12 months do you expect that your household will be better off or worse off?”. The index is calculated by subtracting the percentage of people who think they will be worse off from those who think they will be better off. Historically this index has provided an insight into the pulse of the nation, and has been a good indicator of future consumer spending patterns.

Contact us

Lisa Hooker

Lisa Hooker

Leader of Industry for Consumer Markets, PwC United Kingdom

Tel: +44 (0)7802 882562

Kien Tan

Kien Tan

Director, Retail Strategy, PwC United Kingdom

Tel: +44 (0)7880 552726

Jacqueline Windsor

Jacqueline Windsor

Partner in Strategy& Deals Consumer Markets and Head of Retail, PwC United Kingdom

Tel: +44 (0)7801 074739

David Trunkfield

David Trunkfield

Partner, Hospitality, travel and leisure, Strategy&, PwC United Kingdom

Tel: +44 (0)7764 235446

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