Financial wellbeing in the October 2023 tracker

Summary

• The recent recovery in consumer confidence stalled in October with confidence in the future UK economy falling five points
• Consumers’ confidence in their own future household financial situation is closely linked to their confidence in the direction of the UK economy. The vast majority of those who think their household finances will get worse also think that the UK economy will get worse
• Consumers who think their household finances will worsen said it would do so because of inflation, food prices and the ongoing cost of living crisis
• Household finances remain under pressure, with 55% having made an adjustment to cover essential spending in the last month and 7.6% having missed a loan, credit card, rent, mortgage or household bill payment

You can view more data and articles from our monthly tracker survey on our dedicated Consumer Insight Tracker page.

Recent recovery in consumer confidence stalls

Consumers’ confidence in their future household financial situation and the outlook for the UK economy has been increasing since the beginning of the year, albeit with a dip in July when inflation and interest rates were dominating news coverage. Nonetheless, even after this recovery, more consumers still feel negatively about the financial outlook than positively. On top of this, there are signs this month that this recent recovery may now be faltering or hitting a plateau. 

A fifth (21%) of consumers said they think the UK economy will get better over the next 12 months, whilst 53% said they think it will get worse, giving a net confidence in the future economy of -32. This is an improvement on the -63 level last October, but remains firmly in the negative and a five point drop compared to last month.

Confidence in future household finances was the only measure that did not fall this month, remaining in the negative, at -11. This was calculated from 23% of consumers thinking their household financial situation will get better over the next 12 months and 34% thinking it would get worse.

Consumers’ views on their current household situation is much less volatile, and here we’ve seen a fairly steady decline in confidence since the cost of living crisis began biting. Despite this, consumers do feel net more positive than negative about their current household finances which stands at +16 this month (40% of consumers rated their current household financial situation good and 23% poor).

Consumer confidence fell slightly in the month to October 9th

Consumers’ views on the future of the economy and their household finances tend to be closely linked. As you can see in the figure above, the two tend to follow a similar trend over time. This can also be observed looking at consumers’ responses to each question. The vast majority of those who think their household finances will get worse over the next 12 months also think that the UK economy will get worse (79% of those who think their household finances will get a lot worse think the UK economy will get a lot worse). The opposite is observed for those who think their household situation will get better in the next 12 months, they are much more confident the UK economy will improve; of those who think their household finances will get a lot better, 29% think the UK economy will get a lot better and 31% think it will get a little better. This shows that consumers’ confidence in their own future financial situation is closely tied to the direction of the UK economy. 

Drivers of negative consumer outlook

The link between outlooks of the future of the economy and household finances is not surprising. Looking at reasons why consumers think their household finances will worsen over the next 12 months show that consumers often point to economic factors when considering their future finances.  

“Cost of living crisis. I don’t see the economy improving anytime soon and we’re barely keeping our head above water.” Female, 20s

“Inflation may be coming down, but that just means that prices are rising more slowly. Food in particular is still getting more expensive every time I shop. I have been supplementing my income with savings, but my savings are dwindling.” Female, 50s

“I cannot see a fast improvement in the economy hence the inflation will deepen, prices are rising every week on food and essentials and I expect non-essentials to be out of reach soon. Taxes are high and interest rates go up very often making mortgage payments a struggle for most people.” Female, 50s

These quotes demonstrate that many consumers point to specific aspects of the economy (inflation, food prices, taxes and interest rates) that they feel will impact their future household finances. This shows that consumers’ views are heavily influenced directly by the costs they are facing at home, and whether they think these will rise or fall. 

“Food prices will keep going up, gas and electric won't go down, housing benefit isn't being increased despite record high rent increases.” Female, 30s

“Bills for utilities are all rising, the cost of food is getting higher, as is the cost of fuel, and just about everything else.” Female, 60s

“Energy costs are high and there has been no announcement of government support for the winter like we had last year.” Female, 50s

We also observed this pessimism about the future UK economy when we asked consumers to predict how various aspects of the UK economy will fare over the next 12 months. As the chart below shows, the vast majority of those who think their household situation will worsen over the next 12 months think that food prices (89%), fuel prices (90%), housing costs (85%) will continue to rise alongside increases in interest rates (59%), inflation (64%) and taxes (63%).

Consumers who think their household situation will worsen are also pessimistic about the direction of the UK economy

Drivers of positive consumer outlook

Those who think their household financial situation will improve over the next 12 months were much more likely to say it’s because they think their current financial situation is good and will improve. Reasons included promotions, pay rises and good business:

“Job promotion and pay rise.” Female, 40s

“Mortgage paid off, continue to save.” Male, 50s

“I should be getting a pay rise in November.” Female, 60s

“Because my business is gaining more visibility and traction.” Male, 20s

As with pessimistic consumers, some consumers with a positive view of their future household finances link this to optimism over the direction of the UK economy: 

“The way things are now and the way it is going, I believe that the economy [...] will be better.” Male, 20s

“Because I feel that inflation [is] going down.” Male, 50s

“[I] anticipate that private and state pensions will increase a little as [the] economy gradually improves.” Male, 70s

“Energy prices falling.” Female, 60s

This optimism was also demonstrated in their predictions in the future UK economy where 4 in 10 of these consumers (43%) believe that the economy will grow. Despite this, many of this group still think that prices will rise (61% think fuel prices will rise, 60% housing costs, 59% food prices, 53% energy prices). This demonstrates that many of these consumers are still pessimistic about various aspects of the UK economy, suggesting that their own personal circumstances is a stronger driver of their optimism about their future household finances.

Consumers who think their household situation will improve are slightly more optimistic about the direction of the UK economy, but still expect price rises

Households remain under financial pressure

Over half of households (55%) reported having made at least one adjustment to cover essential spending such as utility bills, housing costs, groceries, school supplies and medicines in the last month. Adjustments include cutting back on essentials, dipping into savings, selling possessions or borrowing. This is significantly lower than the 60% seen last October, though financial hardship remains much higher compared to 2020 and 2021.

Over half of households made at least one adjustment to cover essential spending in the last month

A smaller proportion of consumers are under more severe financial pressure. 7.6% of consumers had missed a housing, bill, credit card or loan payment in the last month. This is a similar rate to the last two months, though levels of missed payments remain elevated compared to 2020 and 2021.

7.6% of households said they had missed a payment in the month to October 9th

The new energy price cap came into effect this month, resulting in a small decrease in the typical annual energy bill for households across England, Wales and Scotland. However, many households will see similar bills over the coming Autumn and Winter as they did last year with the government not repeating the £400 energy bills support scheme. Many households are currently struggling to pay their energy bills with it being the most commonly reported type of missed household bill this month (at 2.3%) and these households are unlikely to see any significant change to their monthly bill. This is a worrying sign as we start to enter the cold wintery period and means many may think twice about turning their heating on.

Summary

These latest tracker survey results show a slight faltering in the recent improvements in consumer confidence:

• Consumers’ confidence in their own future household financial situation is closely linked to their confidence in the direction of the UK economy. 
• Whilst consumers who think their household finances will worsen also think the UK economy will get worse, those who expect improvements to their household finances are more optimistic about the direction of the UK economy. 
• Despite this, optimism about their future household finances seemingly stems more from their personal circumstances than from the direction of the wider UK economy.

Methodology

The fieldwork was conducted by Yonder on behalf of Which between 9th and 10th October 2023. A sample of 2,088 consumers was surveyed online and weighted to be nationally representative.