Consumer confidence plunged to a record low in the third quarter of this year with consumers making cutbacks across almost all areas of leisure spending except holidays.
However, travel could be the sector hit most sharply by consumers reining in spending between now and the end of the year, according to the latest Deloitte Consumer Tracker.
Deloitte reported consumer sentiment dropped to its lowest since the tracker began in 2011 at minus 20% in the July-September quarter, twice as low as in the summer of 2021, and confidence in the UK economy plunged to minus 80%.
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Spending on leisure fell in nine of 11 categories, with the sharpest fall in eating out. Yet Deloitte reported “sustained demand for holidays” with reported spending on travel remaining flat quarter on quarter although down on the same period in 2021 by eight percentage points for short breaks and three percentage points for longer holidays.
Deloitte warned this could be the holiday sector’s “last hurrah” as consumers “expect to spend less across all leisure categories” in the fourth quarter and noted: “The biggest declines [are] expected in long and short holidays, each down 10 percentage points.”
It forecast spending on longer holidays would be 12 percentage points down year on year and short breaks 15 points down.
Deloitte also noted: “Despite this Christmas likely to be free of Covid-19 restrictions for the first time in three years… more [consumers] expect to spend less on travel [by 14 percentage points].”
Almost a third (30%) of consumers reported spending less in the third quarter and 59% said they would have less money to spend at Christmas.
Deloitte hospitality and leisure partner Simon Oaten said: “Many consumers are having to prioritise the essentials, directing spend away from discretionary categories.”
Ian Stewart, Deloitte chief economist, added: “High inflation has driven consumer sentiment sharply lower despite a red-hot labour market.
“Now consumers are starting to worry about the outlook for jobs. With inflation elevated, interest rates on the rise and the labour market starting to cool, the squeeze on spending is likely to intensify.”
The latest Deloitte Consumer Tracker was based on a survey of 3,226 adults on September 17-18.
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