The mood among consumers about their finances suffered its biggest fall in March since the financial crisis of 2008 amid the tightest cost of living squeeze in a generation.
PwC’s consumer confidence report shows that UK households are cutting back on discretionary spending like eating out, holidays and fashion due to rising food bills.
“Spending expectations on eating out and going out have plummeted; they are now the lowest categories as consumers look for ways to tighten their spending,” the report said.
“Other discretionary spending should expect to be hit hard, with holidays and fashion spending intentions also seeing substantial falls since last Spring. Pent-up demand and weak comparatives may mean that both categories should see double-digit growth compared with 2021, but neither is expected to reach pre-pandemic heights.”
Grocery shopping was the only category where people expected to spend more, rather than less, in the next 12 months. However, this is likely to be driven almost exclusively by inflation, rather than specifically heightened consumer demand.
Three-quarters of people surveyed by PwC last month had seen their grocery shopping become more expensive in the past few months, and 78% expect prices will rise further in the coming months.
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PwC’s consumer sentiment index declined to -20 after peaking at +10 in June last year, the quickest rate of decline since the global financial crisis of 2008.
Lisa Hooker, consumer markets Leader at PwC, said: "It’s clear that consumers are having to deal with a significant change in their spending priorities compared to even a year ago, where the index measured a record level of positive sentiment coupled with spending intentions ramping up in more discretionary categories such as leisure and fashion.
"With the latest research, we see consumer spending expectations move almost exclusively toward more vital and essential areas such as grocery shopping, children and babies.
"The shift in sentiment is both significant and sudden. Whilst there is still some post-COVID recovery, spending expectations on eating out and going out have plummeted as consumers look to tighten their belt as they face up to cost of living pressures.
"Even after the extensive travel disruption over the last two years, holiday spending is not immune and will consumers prioritise their main holiday over other breaks, like we saw during the global financial crisis?"
UK inflation hit a 30-year high of 6.2% in February and is predicted to rise over 8% this month.