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Consumer confidence and financial wellbeing in October 2021

Summary

  • Confidence in the future of the economy fell again in October, dropping to its lowest point since January of 2021.

  • The proportion of consumers who missed or defaulted on a payment in the last month increased slightly to 7.3%.

  • Financial difficulty levels are higher among universal credit recipients, who are in a vulnerable position, with government assistance being reduced and the UK facing significant increases in the cost of living.

Consumer confidence dropped in October

Confidence in the future of the economy dropped in October. Over half (55%) of consumers said they think the economy will worsen over the next 12 months, whilst only 24% said it would get better, giving a net confidence of -31. This is a drop from the  -19 seen in September. It is the lowest point in confidence since January of this year, but is still well above the record low of -78 at the start of the pandemic in April 2020. 

Confidence in the future of household finances also appears to be declining, albeit much less steeply than confidence in the economy. Confidence in future household finances was at -5 in October, with a slightly higher proportion thinking their situation will worsen (29%) than improve (24%) over the next year. Still, consumers are much less pessimistic than at the pandemic low of -43 in April of last year.

Consumers have a much more optimistic outlook on their current household situation, with over half (54%) saying their situation is good and 13% saying their situation is poor. This stopped the downward trend of the previous three months.

Declining confidence in the future economy and household finances may be attributable to high inflation rates, supply shortages and predicted increases in the cost of living over the coming months.

Missed payment rates are on the increase

Missed payment rates (on housing costs, household bills, loans or credit cards) increased slightly for the second month running, reaching 7.3% in October. This is one of the higher figures seen since the beginning of the pandemic (higher than the 5.7% seen this time last year), and comes at a time before the full impacts of cost of living increases have been felt by consumers. Other measures of financial difficulty remained consistent with previous months, with 44% having made one of a number of adjustments (e.g. using money from savings or borrowing) to cover essential spending.

Our previous work has highlighted the uneven impact of the pandemic, with low income consumers having more likely experienced a negative impact. We have also reported on higher rates of missed payments among lower income households. 

The ability of lower income consumers to pay their bills is of particular interest since the £20 pandemic uplift to universal credit payments has just been removed, and there have been stark warnings about the possible impact of this. 

Just under 200 consumers in our survey sample (9%) said they currently receive universal credit payments. Of these, 29% also reported having missed a payment in the past month, several times higher than the 7.3% seen in the sample as a whole. 

Since the uplift to universal credit ended just two weeks ago, the full effect is unlikely to have been felt among this group and this missed payment rate reflects pre-existing higher levels of financial difficulty. Not only that, increases in the cost of living, particularly energy prices, will continue to bite over the coming months. Work by the Resolution Foundation highlights the disproportionate impact this will have on low income households, who spend a greater proportion of their budget on energy compared to higher income households.

Our survey highlights the precarious position many lower income households are in, even before they face the full impact of reduced government assistance and predicted increases in the cost of living over the winter.

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 25.10.21

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