Warmer weather heats up consumer spending – PwC

CONSUMERS in the Midlands are feeling better off and more confident about their spending prospects than they have for two years, according to new research by advisers PricewaterhouseCoopers.

In its UK consumer sentiment index, PwC said that nationally, 22% of consumers felt better off and anticipated their disposable income would increase in the coming year – an increase of 5% since January 2010.

The figures may be academic if as expected, savage cutbacks are imposed in today’s Budget.

However, the index also shows that despite the confidence, 31% of consumers now feel worse off – although this is the lowest number since the index began in April 2008.

The national picture is mirrored in the Midlands, with 22% of consumers feeling better off and 30% feeling worse off.
Andy Lyon, retail expert at PwC in the Midlands, said: “The results reflect the current buzz on the high street, in contrast to a difficult April for the UK retail and leisure sector. There is a sense that things are looking up for consumers, but admittedly the current optimism is still fragile.

“High street sales in April and early May were marred by cold weather and pre-election nervousness. But the second half of May saw the weather warm up and many consumers felt more confident after the election. The recent spell of hot weather has kick-started sales of summer stock – particularly fashion – with gladiator sandals and maxi dresses being key trends across the sector.”

He said the World Cup effect was also beginning to impact on high street spending, with more expected.

“In another recent PwC survey, 80% of consumers said they plan to watch the World Cup at home and this will no doubt boost sales of TVs as well as food and drink,” he added.

In the Midlands, the research by PwC also found that 42% of consumers expect their total spending on essential items like food and bills and non-essential items like going out and clothes to increase in the next 12 months.

Only 16% of consumers in the region expect it to decrease (38% expected it to stay the same – 4% were not sure).

However the overwhelming reason identified for spending increasing is a higher cost of living, due to higher food, energy and petrol costs. Only 17% of respondents in the Midlands said they were prepared to spend more because they were feeling more confident about their personal circumstances or they have a new job or were being paid more.

“Overall the index indicates that the outlook for discretionary spending is positive, thanks to a combination of factors including the warmer weather, the World Cup and the fact that the new coalition government is now in place,” said Mr Lyon.

“However, most consumers remain cautious about what lies ahead for the remainder of 2010 and beyond.”

The results of PwC’s UK consumer sentiment index are based on interviews with 2011 respondents between May 21 and 23, 2010.