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Consumers and the Economic Outlook - UK - February 2014

“Many consumers are yet to experience the effects of an economic recovery, wages remain stagnant and disposable income is still being squeezed. There is a sense that thing are ‘less bad’ for many people, rather than ‘better’. However, experiences and confidence vary across consumer groups, with regional, wealth and gender differences evident within Mintel’s research.”

– Alexander Hiscox, Senior Financial Services Analyst

Some questions answered in this report include:

  • Are consumers experiencing an economic recovery?
  • Who’s benefiting from the UK’s growth and who isn’t?
  • What impact have house prices had on consumers’ increased confidence?
  • Which age groups are the most optimistic about their prospects in 2014?

The economy is showing sustained signs of recovery and there are signs that consumers sentiment is improving. However, it would be inaccurate to describe consumer sentiment as optimistic. For most people there has, as yet, been no discernable economic recovery. Finances remain squeezed and the rising cost of living means that disposable income has to stretch further. There is, however, a definite sense that things are “less bad” for consumers. Positive signs include a significant decline in unemployment, consumer spending has increased, and GDP grew in each quarter of 2013. It’s been a long time coming, but talk has finally moved from recession to an economic recovery in the UK.

This report is a detailed study of the economic issues affecting consumers’ finances. It investigates the impact that the economic recovery has had on people’s attitudes towards spending, saving and borrowing. It also looks at how confident consumers are about their future financial prospects, and how positive they are about the health of the broader economy.

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The state of the UK economy
            • Sustained economic growth
              • Figure 1: Quarterly change in UK GDP, Q1 2009-Q4 2013
            • Unemployment falls to a four and a half year low
              • Figure 2: Seasonally adjusted unemployment rate, Q1 2009-Q4 2013
            • Household expenditure increasing as confidence slowly begins to return
              • Figure 3: Real household income and expenditure per head, Q1 2004-Q3 2013
            • Consumers’ current financial situation
              • Consumers’ finances are healthier overall
                • Figure 4: Household financial situation index, February 2009-November 2013
              • Consumers’ finances are “less bad”, rather than fully recovered
                • Spending priorities
                  • Staying on top of household bills is the main priority for consumers
                    • Figure 5: Financial priorities for the next 12 months, November 2013
                  • Financial expectations
                    • Consumers are still pessimistic… but slightly less so than last year
                      • Figure 6: Macroeconomic expectations for 2014, November 2013
                    • Most consumers expect their income to remain stable in 2014
                      • The majority of consumers don’t expect the feel-good factor to return in 2014
                        • Figure 7: Return of the feel-good factor, November 2013
                      • What we think
                      • Issues in the Market

                          • Are consumers experiencing an economic recovery?
                            • Who’s benefiting from the UK’s growth and who isn’t?
                              • What impact have house prices had on consumers’ increased confidence?
                                • Which age groups are the most optimistic about their prospects in 2014?
                                • Trend Application

                                  • Using the influence of family to improve long-term savings habits
                                    • Extended brands can help consumers get back on track with spending
                                      • Teaching financial responsibility can help financial brands to stay ahead
                                      • Economic Conditions and Outlook

                                        • Key points
                                          • The UK economy is growing
                                            • Figure 8: Quarterly change in UK GDP, Q1 2009-Q4 2013
                                          • Unemployment falls to four and half year low
                                            • Figure 9: Seasonally adjusted unemployment rate, Q1 2009-Q4 2013
                                          • Youth unemployment remains persistently high
                                            • Government debt continues to rise as a percentage of GDP
                                              • Figure 10: UK government debt as a percentage of GDP, January 2009-November 2013
                                          • Consumer Finances

                                            • Key points
                                              • Household spending increasing as confidence slowly begins to return
                                                • Figure 11: Real household income and expenditure per head, Q1 2004-Q3 2013
                                              • Consumer spending power is squeezed
                                                • Figure 12: Increases in the cost of living and the growth in average wages, January 2008-November 2013
                                              • Savings ratio shows that consumers remain cautious
                                                • Figure 13: Household saving ratio, Q1 2008-Q3 2013
                                              • Increased lending driving household expenditure higher
                                                • Figure 14: Total gross lending to individuals, credit card and non-credit card unsecured lending (excluding student loans), January 2009-November 2013
                                              • UK government stimulates increased mortgage lending
                                                • Figure 15: Secured lending, total gross and changes in net, January 2009-November 2013
                                            • Consumers’ Current Financial Health

                                              • Key points
                                                • More consumers report having money left at the end of the month
                                                  • Figure 16: Current financial situation, 2011, 2012 and 2013
                                                • The proportion of consumers who are doing okay has remained flat
                                                  • Consumer optimism will not automatically translate into consumer spending
                                                    • Figure 17: Household financial situation index, February 2009-November 2013
                                                  • The squeezed middle-age groups
                                                    • Figure 18: Consumers’ current financial health, by demographics, November 2013
                                                  • Retirees are more likely to be financially healthy
                                                    • Figure 19: Current financial situation, by working status, socio-economic group and household income, November 2013
                                                • Changes in Financial Wellbeing

                                                  • Key points
                                                    • Despite economic improvement, consumers still feel worse off overall...
                                                      • Figure 20: Change in financial situation compared to how it was a year or so ago, November 2013
                                                    • …but consumers’ financial situation has improved compared to last year
                                                      • Figure 21: Change in financial situation over the past year, January 2012-November 2013
                                                    • There has been little change in consumers’ finances over the past year
                                                      • The “sandwich generation”’ feeling the most financially worse off
                                                        • Figure 22: Change in financial situation over the last year, by age and working status, November 2013
                                                      • Younger consumers feeling financially better off
                                                        • Consumers employed part-time are likely to feel financially worse off
                                                          • Women are feeling financial pressure more than men
                                                            • London is leading the UK’s economic recovery
                                                              • Figure 23: Change in financial situation over the last year, by region and area, November 2013
                                                            • A third of Scottish consumers worse off than last year
                                                            • Reasons for Improvement in Financial Wellbeing

                                                              • Key points
                                                                • Higher wages are the tipping point for an economic recovery
                                                                  • Figure 24: Reasons for an improvement in financial position over the past year, November 2013
                                                                • Consumers feel better off with a financial safety net
                                                                  • Job security is more likely to make young consumers feel better off
                                                                    • Figure 25: Reasons for improvement in financial situation, by age, November 2013
                                                                  • Wealthier consumers are more likely to have experienced a rise in income
                                                                    • Figure 26: Reasons for improvement in financial situation, by annual income and housing, November 2013
                                                                  • Renting has got more expensive, whilst mortgage repayments have remained low
                                                                  • Reasons for Worsening of Financial Circumstances

                                                                    • Key points
                                                                      • Increasing household costs are the main reason for worsening finances
                                                                        • Figure 27: Reasons for a worsening of financial situation, November 2013
                                                                      • Consumer feel worse off if they don’t have extra money for enjoyment
                                                                        • Rising rents and mortgages are most problematic for 25-34-year-olds
                                                                          • Figure 28: Reasons for a worsening of financial situation, by age, November 2013
                                                                      • Financial Priorities

                                                                        • Key points
                                                                          • For half of consumers, staying on top of bills is a top priority
                                                                            • Figure 29: Financial priorities for the next 12 months, November 2013
                                                                          • Consumers would rather save before they spend
                                                                            • Under-45s remain uninterested in saving for retirement
                                                                              • Some priorities are more pressing than others
                                                                                • Figure 30: Financial Priorities, November 2013
                                                                              • For consumers who want to buy a new home, it is a top priority
                                                                              • Challenges Affecting Household Finances

                                                                                • Key points
                                                                                  • Rising costs of goods and energy prices are affecting disposable income
                                                                                    • Figure 31: Challenges affecting household finances, November 2013
                                                                                  • Consumers’ responses have been broadly consistent since 2011
                                                                                    • Figure 32: Events that have affected your household finances, 2011-13
                                                                                  • Young families are most likely to have experienced difficulty getting a mortgage or credit
                                                                                    • Figure 33: Challenges affecting household finances, by children and age, November 2013
                                                                                  • Consumers’ perception of the economic recovery varies greatly
                                                                                    • Figure 34: Challenges affecting household finances, by demographics, November 2013
                                                                                • Macroeconomic Expectations for 2014

                                                                                  • Key points
                                                                                    • Consumers are still pessimistic… but slightly less so than last year
                                                                                      • Figure 35: Macroeconomic expectations for 2014, November 2013
                                                                                    • Consumers expect economic growth to be higher than last year
                                                                                      • Consumers expect energy bills to continue to rise in 2014
                                                                                        • Consumers are more optimistic than they were in 2012
                                                                                          • Figure 36: Net expectation of changes in selected macroeconomic measures, 2011-13
                                                                                        • Older consumers are most confident that house prices will rise
                                                                                          • Figure 37: Macroeconomic expectations for 2014, by age, November 2013
                                                                                      • Personal Financial Expectations for 2014

                                                                                        • Key points
                                                                                          • Consumers expecting their income to remain stable in 2014
                                                                                            • Figure 38: Personal financial expectations for 2014, November 2013
                                                                                          • Consumers are still looking to lower debts and build up savings
                                                                                            • Figure 39: Balance of personal financial expectations, December 2011, December 2012 and November 2013
                                                                                          • Younger consumers are more likely to expect to increase their savings
                                                                                            • Figure 40: Personal finance expectations for 2014, by age and region, November 2013
                                                                                          • The economic recovery is being driven by London
                                                                                          • The Return of the Feel-good Factor

                                                                                            • Key points
                                                                                              • The majority of consumers predict that the feel-good factor won’t return in 2014
                                                                                                • Figure 41: The expected return of the feel-good factor, December 2012 and November 2013
                                                                                              • …however, consumers are less pessimistic
                                                                                                • Young consumers are the most optimistic
                                                                                                  • Figure 42: The expected return of the feel-good factor, by gender and age group, November 2013
                                                                                                • Over-65s are also more optimistic
                                                                                                • Appendix – Consumers’ Current Financial Health

                                                                                                    • Figure 43: Consumers’ current financial health, by demographics, November 2013
                                                                                                • Appendix – Changes in Financial Wellbeing

                                                                                                    • Figure 44: Change in financial situation over the last year, by demographics, November 2013
                                                                                                • Appendix – Reasons for Improvement in Financial Wellbeing

                                                                                                    • Figure 45: Most popular reasons for improvement in financial situation, by demographics, November 2013
                                                                                                    • Figure 46: Next most popular reasons for improvement in financial situation, by demographics, November 2013
                                                                                                    • Figure 47: Other reasons for improvement in financial situation, by demographics, November 2013
                                                                                                • Appendix – Reason for Worsening of Financial Circumstances

                                                                                                    • Figure 48: Most popular reasons for a worsening of financial situation, by demographics, November 2013
                                                                                                    • Figure 49: Next most popular reasons for a worsening of financial situation, by demographics, November 2013
                                                                                                    • Figure 50: Other reasons for a worsening of financial situation, by demographics, November 2013
                                                                                                • Appendix – Financial Priorities

                                                                                                    • Figure 51: Financial priorities – Making sure I don’t fall behind on regular bills, building up my emergency savings, saving for a specific reason and spending money on enjoying myself, by demographics, November 2013
                                                                                                    • Figure 52: Financial priorities – Paying off or reducing my non-mortgage debts, saving for retirement, overpay or repay my mortgage and buying a new home, by demographics, November 2013
                                                                                                    • Figure 53: Financial priorities – consolidating my debts, taking out credit and none of these, by demographics, November 2013
                                                                                                    • Figure 54: Financial priorities – Building up my emergency savings, by demographics, November 2013
                                                                                                    • Figure 55: Financial priorities – Saving for a specific reason, by demographics, November 2013
                                                                                                    • Figure 56: Financial priorities – Saving for retirement, by demographics, November 2013
                                                                                                    • Figure 57: Financial priorities – Paying off or reducing my non-mortgage debts, by demographics, November 2013
                                                                                                    • Figure 58: Financial priorities – Spending money on enjoying myself, or the occasional treat, by demographics, November 2013
                                                                                                    • Figure 59: Financial priorities – Making sure I don’t fall behind on regular bills and other financial commitments, by demographics, November 2013
                                                                                                • Appendix – Challenges Affecting Household Finances

                                                                                                    • Figure 60: Challenges affecting household finances – Been made redundant in the last 2 years, by demographics, November 2013
                                                                                                    • Figure 61: Challenges affecting household finances – Experienced difficulty getting a mortgage/credit, by demographics, November 2013
                                                                                                    • Figure 62: Challenges affecting household finances – A substantial rise in home energy costs, by demographics, November 2013
                                                                                                    • Figure 63: Challenges affecting household finances – Employer has imposed pay cuts/pay freeze, by demographics, November 2013
                                                                                                    • Figure 64: Challenges affecting household finances – Employer has cut or plans to cut jobs, by demographics, November 2013
                                                                                                    • Figure 65: Challenges affecting household finances – Have had to spend more on the weekly shop, by demographics, November 2013
                                                                                                    • Figure 66: Challenges affecting household finances – Housing costs have increased, by demographics, November 2013
                                                                                                • Appendix – Macroeconomic Expectations for 2014

                                                                                                    • Figure 67: Economic expectations – Interest rates, by demographics, November 2013
                                                                                                    • Figure 68: Economic expectations – House prices, by demographics, November 2013
                                                                                                    • Figure 69: Economic expectations – Unemployment, by demographics, November 2013
                                                                                                    • Figure 70: Economic expectations – Taxes, by demographics, November 2013
                                                                                                    • Figure 71: Economic expectations – The UK’s economic growth, by demographics, November 2013
                                                                                                    • Figure 72: Economic expectations – Petrol prices, by demographics, November 2013
                                                                                                    • Figure 73: Economic expectations – Energy bills, by demographics, November 2013
                                                                                                • Appendix – Personal Financial Expectations for 2014

                                                                                                    • Figure 74: Economic expectations – Your household income, by demographics, November 2013
                                                                                                    • Figure 75: Economic expectations – Your savings, by demographics, November 2013
                                                                                                    • Figure 76: Economic expectations – Your debts, by demographics, November 2013
                                                                                                • Appendix – The Return of the Feel-good Factor

                                                                                                    • Figure 77: Expected return of the feel-good factor, by demographics, November 2013

                                                                                                Consumers and the Economic Outlook - UK - February 2014

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