Young Brits boost consumer confidence with their spending habits, while wealthy households reduce consumer expenditure.
Fueled by Optimism, Gen Z Brits Lift Economic Confidence
The sunshine of optimism seems to be shining brighter among Gen Z Brits, boosting the overall economic confidence in June, according to recent data. The British Retail Consortium (BRC) reported an improvement in consumer confidence, with the UK's economy standing at -38 in June, a slight uptick from -36 in May.
This optimistic wave can be seen most evidently in the improved confidence about personal financial situations, which reached -5, a significant leap from -12 in May. Personal spending also rose two points to +10. With Gen Zers being the most optimistic about the future, the increase in minimum wage from April might have played a significant part in their pay packet boost.
However, not everyone's feeling the joy. The Consumer Sentiment Snapshot from Boston Consulting Group unveiled that high-income UK households are experiencing a shift, curbing their spending habits. Unlike Gen Z spenders, these wealthier households have started to tighten their belts.
Roaul Ruparel, Director of BCG's Centre for Growth, explains that while high-income households are traditionally more resilient, a noticeable drop in confidence about both their personal finances and the broader economy is becoming apparent. This shift in confidence is manifesting in their spending habits, with the share of wealthy households planning to increase spending decreasing across the board.
The question now is whether this more budget-conscious approach is a short-lived trend or a long-term adjustment. Despite the Bank of England indicating a gradual cut in interest rates, an increase in inflation rate of 3.4% in June suggests otherwise.
Meanwhile, high net worth individuals have started to doubt the UK economy, with their confidence nearly halving, asserts Tom Matterson, Investment Manager at Saltus. This decline in confidence, along with mounting tax burdens and complex regulations, is contributing to investment hesitancy and long-term concerns about the UK's competitiveness.
In stark contrast, lower-income workers and Gen Zers seem to express growing optimism, stemming from wage increases that offer a refreshing breeze to their spending patterns. In spite of more people anticipating increased essential spending, the growth in essential expenses like food, housing, and utilities seems to be decelerating, indicating a general caution among consumers.
The improved economic confidence among Gen Z Brits, driven largely by optimism about their personal finances, extends to the finance sector as well, with increasing consumer spending in business activities. Conversely, high-income households, traditionally more resilient, display a shift in their financial outlook, with reduced confidence in both their personal finances and the broader economy, cycling towards a more budget-conscious approach in their spending habits.
