Which non food product profit lines are going to be most affected by a slowdown in consumer confidence? - UK - January 2008

Table of Contents

• Introduction
• Key themes
• Definitions
• Abbreviations
• Insights and Opportunities
• The confidence of youth
• Society changes, but do consumers?
• Executive Summary
• Consumer confidence
• Sector performance
• Consumers' different views
• Measuring Consumer Confidence
• Key points
• Background
• Explained and Unexplained
• Measuring consumer confidence
  • Figure 1: Leading consumer confidence surveys operating in the UK, 2007
• Relationships between confidence and these factors
  • Figure 2: Consumer confidence and consumption, 1974-2002
  • Figure 3: Correlations between consumer confidence and macroeconomic variables
  • Figure 4: Explained and unexplained confidence, 1985-2003
• Explained and unexplained
• Credit and attitudinal change
• Recent Trends in Consumer Confidence
• Key points
• Recent trends in overall consumer confidence are downward
  • Figure 5: GfK Consumer Confidence Barometer, January 2000-September 2007
• Confidence is unpredictable
  • Figure 6: Climate for major purchases index, January 2000-September 2007
  • Figure 7: Nationwide spending index, May 2004-September 2007
• A changing relationship
  • Figure 8: Average quarterly scores for GfK NOP consumer confidence and major purchasing indices, January 2006-August 2007
• The Economy
• Key points
  • Figure 9: Correlation between macroeconomic variables and consumer confidence
• Developments in GDP and PDI send out mixed messages
  • Figure 10: GDP and PDI growth, 2002-12
• Interest rates -- rises hit confidence
  • Figure 11: The Bank of England' s base rate, 1982-2007
• House prices index
• Slowdown in inflationary pressures mirrors slump in confidence
  • Figure 12: Average mix-adjusted house prices in the UK, 1992-2007
• The importance of unemployment
  • Figure 13: Unemployment expectations, 2001-07*
• Future Consumer Confidence
• Key points
• Economic portents less good
  • Figure 14: Forecasts for UK GDP growth, 2007-11
• Interest rates: Decrease in base rates
• Housing prices: Outlook is pessimistic
• Unemployment: Showing signs of creeping up
  • Figure 15: Unemployed claimants, 2007-11
• Possible role of other variables in influencing confidence
• Discounting: May be helping to allay confidence concerns
• Availability of consumer credit
  • Figure 16: Personal disposable income (PDI), total loans outstanding, total debt/PDI, average household debt and consumer debt write-offs, 2002-06
  • Figure 17: 12-month growth rate of consumer lending, secured and unsecured lending, quarterly Q1 2002-Q1 2007
• Northern Rock: A further shock to the lending market...and consumer confidence
• Performance of Markets
• Introduction
• Carpets/floorcoverings
• Value sales in decline despite innovation from the laminate/hardwood sector
  • Figure 18: Retail sales (carpets/floorcoverings), at constant prices, 2002-07
• Housing and confidence levels closely linked
• Furniture
• Market sees expansion although notable slowdown in growth since 2004
  • Figure 19: Retail sales (furniture), at constant prices, 2002-07
• Housing has a polarising effect
• White goods
• Strong growth albeit built on a sector traditionally driven by distress purchases
  • Figure 20: Retail sales (white goods), at constant prices, 2002-07
• Growth in considered purchasing suggests some link with confidence
• Audio-visual goods
• Spectacular growth as consumers rush to purchase AV equipment
  • Figure 21: Retail sales (AV equipment), at constant prices, 2002-07
• Consumer confidence playing a secondary role as sales expand
• Computer products
• A market that continues to see strong growth
  • Figure 22: Retail sales (computers), at constant prices, 2002-07
• Digital revolution doing much to stimulate demand
• Cars
• Falling value sales hint at recent difficult period for sector
  • Figure 23: Retail sales (cars), at constant prices, 2002-07
• Interest rates are important
• Performance of Markets -- Conclusions
• The pattern varies
  • Figure 24: Major product performance y-o-y vs GFK ndex
• Products hit by a loss of confidence
  • Figure 25: Percentage change in furniture/carpet and car retail sales (constant prices) in comparison to point change in GfK annual barometer score, 2002-07
• Products where confidence has minimal impact
  • Figure 26: Percentage change in furniture and white goods retail sales (constant prices) in comparison to point change in GfK annual barometer score, 2002-07
• Products with little correlation to confidence
  • Figure 27: Percentage change in AV equipment and computer retail sales (constant prices) in comparison to point change in GfK annual barometer score, 2002-07
• Future Market Fortunes
• Key points
• Carpets and floorcoverings
• Depressed housing market expected to impact negatively on sector
• The market will struggle
• Furniture
• A quieter housing market provides challenges
• What do consumers say?
• Future -- discounting not enough
• White goods
• Future -- Fridge/freezers look set to offer best prospects
• AV equipment
• Continuing interest in AV equipment set to maintain demand
• Future -- confidence less important than innovation
• Computer products
• Demand to remain strong although market maturity is a concern
• Future -- a market that is susceptible to falling confidence
• Cars
• Availability of credit and level of interest rates key...
• ...although the market does have some bright spots
• The future outlook
• Consumer -- Attitudes Towards the Economy
• Key points
• Opinion is split
  • Figure 28: Attitudes towards general economic situation, November 2007
• Personal finances vs economy?
  • Figure 29: Attitudes towards general economic situation and own personal financial situation, November 2007
• Consumer Predictions -- Short-term Winners
• Key points
  • Figure 30: Planned purchases over the next two to three years, November 2007
• Consumer Views on Spending
• Key points
  • Figure 31: Attitudes towards money and spending in general, November 2007
• Consumer spending analysis
• SWAs (Spend With Abandon)
• Penny Counters
• Sensibles
• Spend Alls
• Appendices
• Market background
• The GfK NOP and Nationwide Barometers
  • Figure 32: GfK NOP consumer confidence barometer, outline questions
  • Figure 33: Nationwide consumer confidence index, outline questions
• Key variables used to track confidence
• Consumer confidence measures -- Nationwide
  • Figure 34: Nationwide consumer confidence index, May 2004-September 2007
• Consumer attitudes to the economy
  • Figure 35: Attitudes towards general economic situation, by gender, age, region, socio-economic group, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage, mobile provider and TV reception, November 2007
  • Figure 36: Attitudes towards own personal financial situation, by gender, age, region, socio-economic group, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage, mobile provider and TV reception, November 2007
  • Figure 37: Intentions to purchase particular products based on consumer/economic scenario, November 2007
  • Figure 38: Analysis of spending clusters, by gender, age, socio-economic group, region, household income, Internet usage and media usage, November 2007
  • Figure 39: Planned purchasing of TVs, by spending cluster, November 2007
  • Figure 40: Planned purchasing of hi-fis, by spending cluster, November 2007
  • Figure 41: Planned purchasing of cameras, by spending cluster, November 2007
  • Figure 42: Planned purchasing of computers, by spending cluster, November 2007
  • Figure 43: Planned purchasing of laundry products, by spending cluster, November 2007
  • Figure 44: Planned purchasing of fridge/freezers, by spending cluster, November 2007
  • Figure 45: Planned purchasing of dining room furniture, by spending cluster, November 2007
  • Figure 46: Planned purchasing of living room furniture, by spending cluster, November 2007
  • Figure 47: Planned purchasing of bedroom furniture, by spending cluster, November 2007
  • Figure 48: Planned purchasing of kitchens, by spending cluster, November 2007
  • Figure 49: Planned purchasing of carpets, by spending cluster, November 2007
  • Figure 50: Planned purchasing of cars, by spending cluster, November 2007
• Further analysis data
  • Figure 51: ' I tend to save money for a rainy day' , by gender, age, region, socio-economic group, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage, mobile provider and TV reception, November 2007
  • Figure 52: ' I tend to spend the money I have on my home/children/going out' , by gender, age, region, socio-economic group, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage, mobile provider and TV reception, November 2007
  • Figure 53: ' I tend to be cautious in the way I spend money' , by gender, age, region, socio-economic group, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage, mobile provider and TV reception, November 2007
  • Figure 54: ' I live within my means' , by gender, age, region, socio-economic group, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage, mobile provider and TV reception, November 2007
  • Figure 55: ' It is difficult to save money' , by gender, age, region, socio-economic group, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage, mobile provider and TV reception, November 2007
  • Figure 56: ' Borrowing money (from the bank or credit card) makes life a bit easier' , by gender, age, region, socio-economic group, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage, mobile provider and TV reception, November 2007
  • Figure 57: ' I tend to spend the money I have as life is for living' , by gender, age, region, socio-economic group, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage, mobile provider and TV reception, November 2007
  • Figure 58: ' Shopping is a good way to relieve the stress of everyday life' , by gender, age, region, socio-economic group, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage, mobile provider and TV reception, November 2007
  • Figure 59: ' If I want something, I don' t see why I should have to wait until I can afford it' , by gender, age, region, socio-economic group, daily and Sunday newspaper readership, household income, presence of children, Internet usage, supermarket usage, mobile provider and TV reception, November 2007
  • Figure 60: Definitely will buy -- Which of these, if any, do you plan on buying within the next 2-3 years?
  • Figure 61: Probably will buy -- Which of these, if any, do you plan on buying within the next 2-3 years?
  • Figure 62: Might possibly buy -- Which of these, if any, do you plan on buying within the next 2-3 years?
  • Figure 63: Definitely won' t buy -- Which of these, if any, do you plan on buying within the next 2-3 years?
  • Figure 64: Only if I have to -- Which of these, if any, do you plan on buying within the next 2-3 years?