Consumer sentiment has begun to climb as the cost-of-living crisis possibly shows light at the end of the tunnel, even with a slight rise in inflation in February, according to PwC.
Though inflation continues to affect nearly everyone, some consumers are starting to feel slightly better financial stability as cutbacks reduce for many. But there’s also polarising confidence across demographic and socioeconomic groups, with the youngest, oldest and most affluent groups feeling those improvements more than most. And as we head into spring and summer, consumers may look to prioritise holidays, home and health at the expense of other discretionary spending categories. What does all of this mean for consumer businesses?
Sentiment climbs for the second survey in a row, but consumers remain cautious Consumer sentiment has recovered well since Autumn last year, even amid global economic uncertainty and continued inflationary pressures.
In October, PwC revealed the true impact of a series of global crises on consumer confidence. From food and fuel shortages in Autumn 2021, to rising inflation and the war in Ukraine in the following Spring, and onto a cost-of-living crisis last summer, consumer sentiment had dropped to an almost historic low of -44. Only once had it been lower once, at the start of the Global Financial Crisis (-51).
Since then, things have begun to look more positive. In January, PwC's Retail Outlook showed consumer sentiment beginning to trend in the right direction, improving slightly to -32. This time sentiment has climbed again, to -25.
While it remains negative, it is still a whisker better than the first COVID-19 lockdown (-26), and significantly above the peak of the austerity period in 2012 (-42). It’s also the first successive period of improved sentiment since 2021.
Despite wider economic challenges and worries continuing, consumers are looking to cut back less, with certain sections of the public doing better than others. In positive news, most consumers are making ends meet, with only one in 10 telling PwC they are either struggling, down from 13% in Autumn last year.
Though inflation is still the biggest factor affecting spending intentions, impacting four in five of us, as it tapers away throughout the year, there’s optimism that things will start to feel better for many.