Significant drop in consumer sentiment as COVID-19 impacts households but signs of resilience
There’s no denying that COVID-19 has had severe ramifications on the retail and leisure sectors: a huge dropoff in high street footfall, followed by the forced closure of pubs, bars and restaurants, and ultimately the closure of shops selling non-essential goods.
It’s impact has been further highlighted by a dramatic fall in consumer sentiment as the pandemic affects the global economy. UK consumer sentiment fell by 29 points between December 2019 and March 2020 - the worst quarterly fall since our survey began in 2008. This is in stark contrast from last quarter of 2019 when net sentiment had improved from -7 to +3 just after Christmas, largely in response to high employment, real wage growth and political stability.
However, a net sentiment of -26 remains higher than during the global financial crisis (2008-9) and the post-recession austerity period (2011-12). So, despite the challenges facing the country, government intervention in the past week - such as wage guarantees for furloughed employees - may have cushioned the blow for many families.
We’ve seen sentiment decline across every age group, but younger groups appear to have been particularly hard hit. Those under 35 have seen a sharp fall in net sentiment, with a decline of 58 points for the under 25s compared with only an 11 point decline for over 65s.
For the first time since in the history of the survey, the retired are more positive than every age group, except for 25-34 year olds. This is particularly interesting when compared with 55-64 year olds who are now the most pessimistic.
Sentiment is reasonably consistent across all the regions. London remains the most positive region with a net sentiment of -14, despite having the highest number of COVID-19 cases nationally. Among the home nations, Scotland and Northern Ireland reflect the national average (-27 and -23 respectively), with Wales slightly more pessimistic (-32).
It is no surprise that the impact of COVID-19 has prompted such a significant decline in consumer sentiment. Many households are facing the prospect of job and wage insecurity at a scale which they may never before have experienced in their lifetimes.
For anyone that has visited a supermarket recently, or tried to order online, it's little surprise that grocery is the top spending category. In fact, it’s the only category where the balance of respondents expect to increase their spending (+9) over the coming months. However, this figure isn’t quite as high as directly after the EU referendum when the category experienced high inflation.
Given the timing of the survey, there are few surprises in the bottom three categories: going out (-59), eating out (-58) and holidays (-45). To put into context, just three months ago, the net spending intentions for these three categories were -16 for going out, -19 for eating out and -1 for holidays.
We’ve also seen declines in net spending intention for almost all categories since December, although DIY/home improvement (-15) and children & babies (-16) held up better than others, potentially reflecting the fact that we will be spending more time in our homes in the coming months.
“These results do give confidence that consumer sentiment, and therefore spending intentions, have the potential to bounce back quickly once the crisis abates. Whatever happens now, the industry must remain mindful of how to approach the recovery period, when it eventually comes.”
PwC asked the question “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?” PwC then calculated the “consumer sentiment index” by subtracting the percentage of people who thought they would be worse off from those who thought they would be better off.
PwC has asked the same question every few months since April 2008. In the latest survey, PwC spoke to a nationally representative sample of 2110 adults between 5pm 20 March and 5pm 22 March.
PwC also asked whether respondents thought they would spend more or less on different product and service categories in the 12 months, with the net spending intention calculated by subtracting the percentage of people who thought they would spend less from those who thought they would spend more