West Midlands consumers prioritise essentials over luxuries - survey

The latest edition of the PwC Consumer Sentiment survey, conducted in the immediate aftermath of the latest government Budget, shows that consumers rank grocery shopping as the number one expenditure across the West Midlands.

Everyday essentials including grocery shopping, pet and children care are the top spending priorities for West Midlands consumers, compared to spending on luxury items such as holidays and hobbies.

Beauty and personal care, clothing and accessories, going out and eating out were listed as the lowest four categories for spending, with the squeeze on household costs impacting disposable income available for leisure and hospitality in the region.

Tom Copeland, PwC Midlands consumer corporate finance deals partner, said: “Consumers have been feeling the pinch across the board since the start of the year, and we know in times of high inflation that people prioritise essential spending and saving over luxuries and treats.

“West Midlands consumers are generally following the trends that we see across the country, however home improvements came in as the fourth priority compared to sixth across the UK, demonstrating that investing in property is still a focus for those in the region.

“Overall consumer sentiment across the UK is starting to show green shoots of recovery and with the Bank of England 's recent announcement that a recession is now unlikely, we expect consumer confidence to start growing over the coming months. ”

Looking at the whole of the UK, consumers are feeling more positive moving into spring.

Sentiment, which sat at -44 in September 2022 and -32 at the beginning of January 2023, now sits at -25. Sentiment has now recovered to a whisker better than at the start of the first Covid lockdown (-26 in March 2020), and is also now better than the worst point of the austerity period in 2012 (-42). It 's also the first consecutive period of improved sentiment since early 2021.

Despite rising inflation and the cost of living crisis, almost a third of consumers polled now believe their finances are 'healthy ' with 90 per cent stating they do not consider themselves to be struggling.

One in ten consumers state they are in trouble, financially, or might miss a bill - down from 14 per cent who felt the same last Autumn.

This improved financial health is reflected in consumers ' spending intentions, with fewer people expecting to make spending cutbacks than six months ago: from 83 per cent in Autumn to 78 per cent in Spring. The biggest improvements were in the proportion of people planning to reduce home energy consumption (from 45 per cent to 37 per cent) or to drive less because of petrol prices (from 27 per cent to 16 per cent).

However, retail and leisure spending remain vulnerable to spending cutbacks, with significant numbers of people still planning to eat out less (38 per cent), order fewer takeaways and deliveries (33 per cent), or trade down to a cheaper supermarket (30 per cent) in the next three months.

Lisa Hooker, leader of industry for consumer markets at PwC said: “It is encouraging to see how consumers are responding to the changing economic environment. Whilst sentiment is still negative, it is beginning to recover.

“I would encourage retailers to lean into this as the brighter weather will spark less concern with energy prices, especially as the Energy Price Guarantee has been extended.

“Time and time again, consumer sentiment continues to show me how resilient this sector is - both business and consumers have been savvy during the last 12 months. That innovative thinking has laid the foundation for what we hope will build more sector success in 2023. ”