Consumers’ net spending on day-to-day categories was up in Q1 2025, rising to its highest level in our survey’s history. Among consumers who spent more, there was a seven percentage point increase in the proportion who blamed higher prices, in a sign of inflationary pressure on budgets. The data from our survey shows that overall net spending on discretionary goods and services dropped four percentage points as consumers cut down to cope with the higher costs of essentials such as food and utility bills. Demand for discretionary goods and services remains slow as seen by the UK’s weaker economic performance since May 2024. Nervous consumers in the face of much uncertainty are prudent, saving their money rather than spending it on bigger ticket items. When asked, 58% of consumers agreed that they have been more careful with their overall spending in the first three months of 2025, and 54% say they have consciously cut down on luxuries or treats. 

Outlook for Q2 2025

According to our Tracker data, consumers expect to spend more overall on both day-to-day and more discretionary categories in Q2. If we go by the performance of the retail sector since the start of the year, consumers might start to show signs of being ready to spend more but the recovery is likely to be mixed. Consumer products businesses will also be among those most affected by recent geopolitical developments. Tariffs announced by the US government could increase costs, potentially squeezing profit margins or forcing businesses to raise prices, which could dampen the recovery in demand. The combination of reduced consumer spending, rising costs and the potential impact of new tariffs suggests a challenging outlook for the consumer products sector in the coming months. Businesses may need to focus on cost management, innovation and strategic pricing to navigate these headwinds effectively. 

Research carried out for our 2025 Deloitte Consumer Products Outlook, shows that top business performers in the sector differ from other consumer products companies in three areas: they invest more in managing their product portfolio and mix to entice the consumer, they invest in capabilities to stimulate demand including more micro targeting of consumers and fund those investments by finding new efficiencies, especially through digitisation and automation.