Eight in 10 consumers set to cut spending amid Iran war cost surges

Consumer confidence has registered its steepest monthly drop since June 2022 as customers brace for rising costs, with 80% planning discretionary spending cutbacks in the next three months. According to the PwC’s consumer sentiment survey 90% of consumers are concerned about the cost of living, and 40% plan to eat out less over the next quarter. Meals out are also the area where the highest proportion of consumers plan to reduce spending over the next year, with a 32% drop registered month-on-month in the number of consumers earmarking funds for dining out. This decline is 9% steeper than the 23% drop registered in January. PwC UK’s hospitality and leisure sector lead Rick Jones said: “This change in sentiment clearly suggests discretionary spending is set to be reined in by consumers in the short-term. While most of the downward swing in spending intentions is directed at retail moments, eating out and hospitality, travel and leisure companies also need to act now. “For high street hospitality operators, this will mean continuing to focus on providing great experiences and communicating value for money offerings to drive footfall. Also, pubs, bars and other leisure and hospitality businesses will be hoping the World Cup this summer can provide a timely boost to trade. For holiday operators, offering consumers flexible terms and alternative options could help remove barriers to early bookings.” The RSM UK’s consumer outlook monitor echoed PwC’s findings, with figures finding that families had 23.1% of income leftover after paying for essential last month, down from 26.9% in February. RSM UK’s head of consumer markets Jacqui Baker said “families appear to be hit particularly hard” by rising costs, which is “especially concerning as families are a big driver of overall spending, meaning the knock-on effect for consumer-facing businesses will be exacerbated. “Unfortunately, the slowdown in spending is expected to accelerate as consumers take a ’wait and see’ approach. The first area that households typically cut back on during an economic downturn is retail spend and dining out, meaning there’s likely to be tougher times ahead for consumer-facing businesses,” she added.