Consumer products sector quarterly update

Uncertainty continues to weigh on consumers with spending falling in Q4 2025. The latest Deloitte Consumer Tracker data shows that compared with Q3 net spending was down in Q4 across both day-to-day and non-essential spending for the second consecutive quarter. Despite Q4 including the crucial Christmas shopping season net spending was down across almost all categories. The only exceptions were for spending on utility bills and alcohol which grew in Q4 mainly due to seasonality, while spending on electrical equipment remained flat. 

To understand spending sentiment better, our survey has been measuring consumer attitudes to spending. The data shows that 41% of UK consumers agree that they spent more because of higher prices in Q4. At the same time, over a third (39%) agree they were more frugal and one in three were either consciously cutting down on luxury or treats (32%) or bought more food and drinks on discounts (31%). The data also shows that one in four only spent on essentials (25%). By contrast, only one in ten consumers said that they spent more on experiences (12%) or on luxuries (10%) in Q4.

Overall, our findings illustrate the persistent negative impact of the post-pandemic inflation shock. Higher levels of inflation since the pandemic have changed consumers’ view of what is a fair price and what is good value. This shift in value perception has led to higher levels of value-seeking behaviours. These include focusing more on whether the value of a product or a service is worth its price before making a purchase. The search for value is also driving more cost-conscious, deal-driven, or ‘doing without’ shopping behaviours as well as damaging loyalty. Higher proportions of consumers across all income demographics are expecting more value for the asking price.

To combat inflation major UK brands and supermarkets have recently lowered prices on thousands of products, notably slashing costs on everyday items. Given the increased price sensitivity of consumers, brands that get the pricing right and boost consumer perceptions of their value, including offering tangible benefits around quality and service, will be well positioned to attract consumers, increase their margins and build longer-term loyalty. 

Outlook for Q1 2026

Our Tracker data on spending intentions for Q1 2026 shows that consumers expect to spend less on both day-to-day expenditure and non-essential categories in Q1. The recent easing in the rate of inflation is expected to drive lower prices across many essential goods and service categories from food prices to the cost of energy. Our data shows that consumers intend to spend significantly less on groceries, everyday household items, transport and utility bills.  Consumers also expect to spend less on most discretionary goods including clothing and footwear and larger discretionary purchases such as furniture or electricals. An exception is major appliances where there is a small uptick in consumer spending intention for Q1 compared with Q4 2025. 

The outlook for the consumer products sector in 2026 remains mixed. Some consumers are feeling buoyed by steadying interest rates and inflation, while others continue to adopt more cautious behaviours when making purchasing decisions. Overall, a broader improvement in consumer confidence will require a more significant change in perceptions of affordability. For now, consumers remain hesitant about the economic outlook and until they can be persuaded otherwise, they will continue to hold off parting with their savings and hard-earned cash. It might be that with inflation expected to return to its 2% target this spring and interest rates falling, economic improvements could come sooner rather than later leading to a possible recovery in consumer spending. 

For businesses in the consumer products industry, over the last year key drivers of change including deglobalisation and artificial intelligence, hit the industry at speed. Accepted truths, like the imperative for breadth and scale are being challenged by the need for more portfolio focus, and speed and agility in decision-making. In a recent report on the global outlook for the consumer products industry, Deloitte highlights seven priorities for the industry in 2026 including the need for increased focus, simplicity, nimbleness, collaboration and, of course, more value for consumers. Businesses that use these priorities to initiate tough conversations – and make the difficult choices they demand – may be better positioned for the year ahead.