An improving economy yet to influence hesitant consumers

PwC Consumer Sentiment Survey - Spring 2024

Young woman shopping

Despite a strengthening economic outlook and short-term financial improvements for many consumers - particularly those of working-age - this positivity is yet to pull through to consumer sentiment. Why is there a hesitancy around spending, how is that impacting consumers’ preferences and priorities and what might that mean for the rest of the year, for both consumers and retail and leisure operators?

Household finances improving but consumer confidence stagnating

Economically, things look to be picking up for consumers. Since the start of 2024, inflation has fallen, National Insurance has been cut, and wage increases have held up. These changes have been reflected in broadly improving household finances for the majority of working-age individuals (especially for the 25-44 year olds), albeit with a slight deterioration for those on benefits.

However, these broadly positive economic indicators are yet to pull through to improved consumer sentiment. In fact, the recovery we’ve recently seen in consumer sentiment has stalled, with our main index number falling from -4 in January to -5 in March 2024. Even though it remains better than the long run average and higher than a year ago in March 2023 (-25), we’re seeing a slight decoupling of improving economic activity and household finances with spending. It appears that previous financial and economic uncertainty has created a ‘spending hesitancy’ among consumers.

We’ve seen the biggest sentiment declines among the middle classes and working ages, polarisation increasing between the most confident and the least, and almost three quarters of people still expecting inflation to affect spending this year. And while spending intentions are improving, consumers remain cautious on discretionary spending, with over 70% planning to cut back in the next three months (compared with 78% last March) and particular reticence on bigger-ticket spending categories.

Positive indicators for the economy…

So far this year, inflation has continued to fall while earnings have held up. This is a trend that started in June 2023 and one which we discussed in our Retail Outlook. On the face of it, that suggests that things should be getting better financially for many.

“Which of these statements most closely describes your financial situation at the moment?”

This is reflected in household finances, with more consumers saying their finances are ‘healthy’ - the highest figure we’ve seen in two years. But, at the same time, we’ve also seen a slight increase in the number of consumers struggling, continuing the fluctuating polarisation between age and socio-economic groups we’ve seen in recent surveys.

Digging into individual groups, the overall pattern is very similar to what we’ve seen previously. About half of older people and the more affluent say their financial situation is healthy, meaning they have money left in the month or savings or luxuries, with those in lower paid jobs or on benefits continuing to struggle the most. Working age people have seen the greatest improvements in finances, helped by National Insurance cuts and other financial incentives - 25 to 34 year olds in particular have seen a big improvement in ‘healthy’ finances, with improvements in the 35-44 year olds and a slight polarisation in the 45-54 year olds.

“Which of these statements most closely describes your financial situation at the moment?”

By age group

By socio-economic group

While more of those in socioeconomic categories D and E are currently struggling, we’re optimistic that things will improve for them in the second quarter of the year. Many of these individuals are likely to benefit from any of the incoming living wage rises, a reduction in National Insurance payments, an uplift in benefits and a continued drop in price inflation.

…yet to translate to improved consumer sentiment

In general, changes to National Insurance, economic improvement, reducing inflation and other positive factors on the horizon mean, on paper, people should be feeling better off. But sentiment has actually gone down by a percentage point (from -4 to -5), with a slight increase in polarisation between those who are doing better and worse.

In contrast to the improving household finances, sentiment has fallen fastest among the middle class and working age groups. As has always been the case since we started our survey in 2008, the under 35s remain the most positive about their future disposable income, remaining net positive overall and with the under 25s actually seeing a slight increase in their sentiment since January. The 45-54 year old group is the least positive, and less optimistic than 55-64 year olds, which had been the least positive group until this year. Looking at the socioeconomic breakdown, falling inflation and National Insurance cuts have only improved the sentiment of the most and the least affluent.

Balance of opinion by age group
Balance of opinion by socio-economic group

The results in general seem to be a little counterintuitive: people appear to have more cash in their pockets, say that their household finances have improved, and should be feeling more economic stability, but it isn’t translating to better sentiment. For some reason, many are still concerned about their future income, despite all the things that have helped them over the last quarter. And it’s leading to a spending hesitancy among consumers.

What has that done to spending intentions?

This hesitancy is reflected in consumers’ plans. Despite inflation falling, almost three quarters say that it will still affect their spending patterns this year. Other factors such as interest rates, debt repayments, job security, rent and mortgages are also still weighing on consumers’ spending intentions, albeit slightly fewer people mention these factors compared with this time last year. On the plus side, these findings are better than last year, but not by much.

We also asked people if they were planning to make cutbacks across a range of areas over the next three months. Across every area, fewer people expected to cut back when asked today compared with previous years. For example, 33% expected to make fewer purchases in the next three months, down from 42% in 2022 and 39% in 2023. There has also been a slight increase in those who won’t cut back their spending at all - now 29%, compared with 21% in 2022 and 22% in 2023. Conversely, that does mean that over 70% of people still expect to make some kind of spending cut back, so people are still nervous about spending in the short term despite the economic good news.

Percentage of people expecting to cut back their spending over the next three months

Spending cutbacks intention by age group, March 2024

Spending cutbacks intention by socio-economic group, March 2024

Even those groups with the highest sentiment are looking to cut back on spending, with young people more likely to be cutting back than older age groups, and over two thirds of the most affluent planning to reduce spending, so it's affecting everyone. This could be why people are cautious about spending in the year ahead, with even the most wealthy impacted by a need to keep up certain standards of living, ‘sticker shock’ more broadly (the shock of realising the unexpected increased cost of items bought less frequently) and a need to get what they perceive to be value for money.

Similarly to the last few surveys, spending intentions in the coming year are negative across all categories apart from grocery - i.e. more consumers expect to spend less on these categories in the next 12 months than spend more.

There’s been little fluctuation in absolute numbers this time round, but what may be more telling is the order of priorities, with spending on holidays and big ticket items becoming lower priorities relative to other categories compared with previous surveys. Holidays, in particular, have fallen back for younger people since January, when many people traditionally prioritise booking a holiday.

Coupled with the decline in big ticket spending, there’s seemingly a nervousness around spending large amounts - or borrowing in order to do so - despite the fact that people should generally have more cash.

Consumer spending intention by category, March 2024

“How do you expect your spending to change in the next 12 month?”

However, the good news is that spending intention is actually much better for all categories than it was this time last year. And for every category except holidays, it's either the same or better than January. Even the decline in holidays could be put down to a seasonal effect.

Interestingly, spending priorities vary significantly by age group with the exception of grocery shopping, which remains the number one priority for every age group. For those over 45, holidays are more important, although this category falls outside the top 5 for every other age group. Meanwhile, the under 25 have completely different priorities to everyone else, with health and wellbeing and clothing firmly in the top three and in positive territory - i.e. more young people expect to spend more on these two categories than spend less in the coming year. For people over the age of 25, clothing is a much lower priority. Interestingly health and wellbeing is a common priority for many, suggesting the increasing importance of wellbeing both for the young, and the young at heart.

Top 5 category spending priorities by age group
Top 5 category spending priorities by age group

A more positive outlook for the second half of the year?

While consumer sentiment may be subdued relative to people’s finances, there are reasons to be positive for the months ahead.

The good news is that, economically, things look to be picking up for consumers - inflation has fallen and continues to trend in the right direction, we’re now seeing sustained wage rises above inflation, the highest ever cash increase in National Living Wage, and another National Insurance cut, all of which should make people feel even more financially comfortable.

Yet, while household finances have improved in recent months and many spending indicators are better than last year, these factors have yet to fully pull through to consumer confidence. As a result, people are still hesitant to spend and, indeed, the vast majority are still expecting to cut back on spending in the short term.

And it’s not totally clear why these positive economic indicators are yet to pull through to improved consumer sentiment. It could be that the slowdown in inflation has yet to be felt in wallets given that most prices are still rising (albeit more slowly). In addition, there’s increasing job uncertainty, conflicting economic indicators, geopolitical instability, and even the wet weather that’s plagued the high street in recent months. It’s also possible that the last two years of economic uncertainty - and the black swan events that preceded - have conditioned consumers to expect bad news and be more cautious around their finances as a result. It’s most likely a combination of all of these factors.

However, even with mixed results and stilted spending intention, there will still be opportunities for savvy retail and leisure operators. Sentiment remains resilient by historical standards, and household finances have now stabilised for many. While the turnaround may be slow, there will be pockets of opportunity.

The second quarter of 2024 should bring a positive change in sentiment as the indicators we’ve mentioned filter through into people’s wallets - and psyche. Whether that’s the National Living Wage increases, an uplift in benefits or the pensions triple lock, there will be tangible benefits to some groups, suggesting that sentiment could be in a much stronger position in the summer. Longer-term, it will be interesting to see how the election - and potentially any new government honeymoon - affects both consumer sentiment and spending in the second half of the year.

Now we know that people have more disposable income, how do you persuade them to spend their cash?

Businesses should look to identify and understand these potential purchasing groups - and demographics - now and explore how to encourage them to spend responsibly, and in a way that works for them. That might require some thought to your consumers: how, when and where are they spending? And what do you need to do to take into account the polarisation across these demographics to avoid alienating any one customer segment?

And whatever the demographic, consumers are increasingly looking for the perception of value. This provides a great opportunity for consumer-facing businesses to help them realise this value, whether that’s a premium service, special offers and cheaper options, or even alternative ways to finance purchases.


  1. PwC’s latest Consumer Sentiment Survey was conducted between 29 March - 1 April 2024 and includes responses from a nationally representative sample of 2,068 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

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