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Consumer confidence and financial wellbeing in December 2021

Summary

  • Confidence in the future of the economy dropped amid the emergence of the Omicron variant

  • Outlook on household finances remains more optimistic, despite rises in the cost of living

  • Financial difficulty rates remain stable for now, although usual Christmas pressure alongside increases in the cost of living may yet bite

Consumer confidence falters amid Omicron variant concerns

Confidence in the future of the UK economy decreased this month. 58% people said they thought the economy would be worse in 12 months time and only 18% said it would be better, giving an overall score of -40 points, which was down from -19 in November.

The drop in confidence comes as little surprise given the recent emergence of the Omicron Covid-19 variant, the resulting move to ‘Plan B’ restrictions aimed at curbing its spread and dire warnings about spiked in case numbers before the end of the year.

However, the fall this month continues a downward trend from a high of +26 in May 2021 and since this has happened progressively over several months it cannot be entirely attributed to the new Covid-19 variant. 

As has been the case throughout the pandemic, confidence in household finances has been stronger than confidence in the wider economy. Confidence in current household finances recovered from a slight decrease last month, while confidence in future household finances remained stable, although it is somewhat below its pandemic peak in May. 

Whether consumer confidence continues even at the current levels will depend on how the situation develops over the Christmas period and into the new year, although the new Covid-19 variant is not the only factor that is likely to affect economic confidence into the new year. Surging inflation is expected to continue into 2022, with a likely further increase in the energy price cap.

Financial difficulty levels remain stable for now

The past couple of months have presented many challenges for consumers with growing concerns of a ‘cost-of-living crisis’. We have previously reported on the high levels of concern about prices, and the impact that price rises and energy company failures have already had on many consumers. 

However, we have not yet seen these issues lead to an increased incidence of severe financial difficulty among consumers. 6.1% reported having missed or defaulted on a payment this month, compared to 6.6% last month. The missed payment rate is very similar to that in December of last year (6.3%). Less severe measures of financial difficulty like cutting back on essential spending also remained stable. 

It may be that recent increases in the cost of living simply haven’t had time to feed through to higher levels of financial difficulty, but could do over the next few months. January 2021 saw an elevated rate of missed payments (7.9%) and the fear will be that January 2022 could be worse due to the combined impact of inflation and the usual pressure placed on household finances over Christmas. 

Contact us

If you have any questions or would like to find out more, please email Sophie Beesley at consumerinsight@which.co.uk

Published on 16.12.21

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