Weekly economic briefing: Ageing consumers: Will retailers still love me when I’m 64?

The Weekly Economic Briefing is written by two senior Deloitte Economists, David Rumbens from Deloitte Access Economics in Australia and Ian Stewart Deloitte’s Chief Economist in the UK. They provide a personal view on topical financial and economic issues. Subscribe to receive the Weekly Economic Briefing in your inbox!

In this week’s blog:

Australian economic briefing
UK economic briefing
International economic briefing

Australian economic briefing by David Rumbens

This section of the briefing provides a snapshot of key economic data and issues of relevance to Australia.

Ageing consumers: Will retailers still love me when I’m 64?

Deloitte Access Economics’ latest Retail Forecasts report showed that retail business conditions remained below average in late 2017 and into early 2018. This is in stark contrast to most other industries, where conditions have been strong. And little wonder. Consumers have been wearing very low growth in incomes for the past few years, and have had to reduce the amount they save from their weekly salary to fund growth in their spending. And retailers’ pricing power has been low – which is reflected in very low consumer price inflation in discretionary goods and services. In the month of January this year, retail spending only increased by 0.1%.

That said, some parts of retail are going well. The penetration of cashless and online retail is growing – cashless retail sales were 9.4% higher over the year to February 2018, compared to the previous year (based on the NAB Cashless Retail Sales Index) and online retailing was around 13% higher over the year to January 2018, compared to the previous year (based on the NAB Online Retail Index).

A challenge for retailers is that population ageing will be (and probably has already been) a drag on retail spending. The average retiree is a lower spender than the average person of working-age. The overall impact on retail spending however will be partly offset by the rising number of people in the 65+ age group. And that provides some opportunity – growing numbers of people in the 65+ age cohort, which has historically complained it is ignored by retailers.

All major categories of spending lose out as people get into their senior years, yet some do relatively better than others. Not surprisingly, health spending holds up pretty well as people age, although only a small portion of this is retail-related. Spending on household goods and services also holds up better than most other categories, while spending on garden products does relatively better too. From a retail perspective, the biggest losers from population ageing are food and clothing retailers.

Chart 1: Household expenditure by age group, 2015-16

As baby boomers continue to enter the 65+ age group, we find that the spending habits of this age group are changing too. While seniors earn less than those of working age, today’s seniors are wealthier and healthier than the generation before, and are spending a rising share of their income on housing and holidays. This is good news for retailers playing in the areas of travel and household goods and services.

The silver lining is that retirees are richer than they used to be. The average over-65 households in 2015-16 had an average income 38% higher in nominal terms (i.e. including inflation) than those in 2009-10 (see chart 2). That was aided by an average net worth that was 34% higher in nominal terms.

Chart 2: Weekly income and net worth of households aged over 65 years
2009-10 to 2015-16


So the market for retiree retail spending is getting bigger – in terms of both the number of consumers and their wallet size. We can expect that to continue, with retiring baby boomers having done well out of asset price growth (though many will need to downsize to access their capital gains).

For more information on the Australian brief, please contact author David Rumbens.


UK economic briefing by Ian Stewart

A personal view from Ian Stewart, Deloitte’s Chief Economist in the UK. Subscribe to and view previous Monday Briefings at: http://blogs.deloitte.co.uk/mondaybriefing/

Measuring happiness

  • The idea of measuring national happiness has been around for decades and was pioneered by the government of Bhutan in the 1970s.  Since the global financial crisis interest in measuring, and understanding, what drives happiness, has risen.
  • For much of the last two hundred years economic progress was seen as the main driver of happiness. But once income passes a certain threshold that relationship seems to weaken. A US study in 2009 showed gains in income boosting happiness up to an annual income of round $75,000. Beyond that gains in happiness levelled off. The UN’s latest World Happiness Report shows that while US income per capita has more than doubled since 1972 measured happiness has remained roughly unchanged.
  • The apparent weakening in the relationship between income and happiness in many richer countries has fuelled interest in alternative measures of welfare. In 2011 David Cameron asked the UK’s Office of National Statistics (ONS) to compile an annual ‘well-being’ index. Each year some 200,000 Britons are asked a set of questions about their lives. The overall index currently scores 7.69/10, the highest reading since its inception.
  • For some happiness is a vague, subjective concept that does not allow meaningful comparisons across countries, groups or over time. Yet as Lord Richard Layard, dubbed the ‘happiness’ economist, observes, if policymakers are trying to raise overall welfare, we need to measure happiness. In response to the claim that self-assessed happiness is unreliable, Lord Layard notes that an individuals’ responses correlate with levels of the stress hormone cortisol and, indeed, life expectancy.
  • The annual World Happiness Report, co-authored by Lord Layard, ranks 156 countries by their happiness levels based on the results from Gallup World Poll surveys. Finland ranks as the world’s happiest country, followed by Norway, Denmark, Iceland and Switzerland. These five countries continually top the happiness league table. The bottom of the happiness league is dominated by low income countries, some of them, such as Syria, Afghanistan and Yemen, suffering from conflict.
  • What explains the position of the highest rated countries?
  • It helps that all are rich, advanced economies with high GDP per capita. This is one of the six factors that the UN has found support well-being. The top rated countries also score highly on the other five factors: healthy life expectancy, social support, freedom, trust and generosity. These influences are themselves a product of income, politics, culture, history and individual behaviour, and can substantially offset the effects of lower income levels. Thus Costa Rica and New Zealand rank above German and US in the happiness league, despite having significantly lower levels of GDP per head. Conversely, some relatively rich nations, including Saudi Arabia, Kuwait and Singapore, rank well down the happiness league.
  •  Government clearly has a significant influence. While tax rates in Scandinavia are high, citizens have access to high quality public services: free healthcare and university education, uncontested unemployment benefits and generous maternity leave. The top rated countries have high average life expectancies and low levels of income and gender inequality. Many studies suggest that peoples’ perceptions of material well-being are influenced by how they are faring relative to others; significant inequality tends to reduce happiness.
  • In the UK ONS research shows that work, health and relationships with family members are major influences on happiness. Having a secure job seems particularly important to well-being, and not solely because of the income. Work provides structure, self-esteem and social connections. And the more an individual identifies with family, friends, colleagues, their local community and other groups the happier they tend to be.
  • Changes to lifestyles can make a big difference. Exercise and reducing time spent on social media are widely thought to contribute to happiness. Researchers at the OECD recently suggest that for those with the wherewithal paying others to do your chores reduces time stress. Reduced commuting times are associated with higher levels of happiness.
  • The research into happiness is still in its infancy and the current measures are far from perfect. Yet the same applies to measures of economic welfare, such as GDP per head, which have been around almost 100 years.
  • Aristotle said that, “happiness is the meaning and the purpose of life, the whole aim and end of human existence”. Happiness may be hard to measure; but it warrants the effort.

PS: Following our note on the Universal Basic Income (UBI) I had an interesting chat last week with Anthony Painter at the Royal Society of Arts (RSA). The RSA has proposed that as a step to a full UBI the government should give all adults under 55 £10,000 over two years, partly funded by reducing existing benefits and clawing back tax allowances. The idea would be to help people to retrain, set up businesses, care for relatives and to provide a buffer against adverse technological change. Even this, more limited form of UBI would cost £15 billion on the RSA’s estimates. Anthony told me that part of the inspiration for the RSA’s proposal was Mrs Thatcher’s Enterprise Allowance Scheme in the early 1980s that provided a grant to unemployed people to start a business. It funded 325,000 people, including the artist Tracey Emin and Superdry founder Julian Dunkerton.

PPS: A new report by the Bank for International Settlements (BIS) shows that cash use is on the rise around the world, despite the increasing prevalence of digital payment methods. Cash in circulation as a share of global GDP has risen from around 7% in 2000 to 9% in 2015. Although there has been a rise in the circulation of both smaller and higher denomination notes, it is the latter that has most driven increased cash circulation. BIS speculate that people are less trusting of banks following the financial crisis and are choosing to keep more of their savings in cash.  Iceland, a country hit particularly hard by the crisis, has seen the share of cash in circulation jump from less than 1% in 2007 to almost 2.5% today.



The FTSE 100 ended last week down 3.4% at 6,922, the S&P 500 was down 5.6% and the Nikkei down 5.8% as concerns over US interest rate rises and protectionism roiled markets across the globe.

International economic briefing by Ian Stewart

Economics and business

  • Donald Trump is to impose 25% tariffs on $60bn worth of Chinese imports because of concerns over China’s practices regarding intellectual property
  • In response China outlined plans to introduce tariffs on US imports, highlighting 128 products accounting for around $3bn of imports
  • The US exempted the EU and six other countries from the steel and aluminium tariffs pending further discussions on trade
  • The US Federal Reserve raised interest rates by 25bps and pointed to higher than expected rates in the coming years as a result of strong growth
  • The Bank of England said UK inflation was likely to remain above 2% for a sustained period, suggesting a rate rise in May was probable
  • UK wages increased at the fastest annualised pace (2.6%) in nearly two-and-a-half years in the three months to January
  • UK inflation eased to 2.7% in February, down from 3% in January as post-referendum sterling weakness exerts less pressure on inflation
  • The British Chamber of Commerce raised its UK growth forecast for this year and next, citing robust consumer spending and strong global growth
  • The euro area flash PMI, usually a good indicator of economic activity, slowed to a 14-month low in March
  • A BoA survey of global asset managers found a global trade war to be the biggest perceived risk to financial markets. Fund manager pessimism about UK equities reached a record high
  • China appointed a new head of its central bank, Yi Gang who is US educated and expected to engage in further financial market liberalisation
  • Research from the European Central Bank says that an ageing European population threatens to depress economic growth and keep interest rates low for decades to come
  • Google is to spend $300m targeting fake news after criticism of the role of misleading information in the run up to the US elections and Brexit vote
  • Citigroup is imposing restrictions on some commercial borrowers that sell firearms, a move that comes amidst increasing debate on gun control
  • UK restaurant chain Prezzo has reached an agreement with its creditors which will see it close 94 of its 300 restaurants
  • A US government shutdown was averted after Donald Trump approved a $1.3tn spending bill which includes an $80bn increase in defence spending

Brexit and European politics

  • The UK and the EU agreed a conditional 21-month ‘transition’ phase after the UK leaves the bloc next March, avoiding a ‘cliff-edge’ exit
  • The EU negotiation guidelines on trade in services allow for market access “under host state rules”. That would require UK businesses to consider 27 sets of domestic rules to determine whether a service is permitted, rather than one over-arching framework
  • The UK will remain in the Common Fisheries Policy and the EU will decide the UK’s fishing quotas during the 21-month transition period
  • The number of people claiming asylum in the EU fell by almost 50% in 2017
  • One in seven EU firms with UK suppliers have moved part or all of their operations out of the UK, according to the Chartered Institute of Procurement and Supply
  • EU leaders agreed that UK banks should be given “appropriate access” to the EU financial services market after Brexit, the FT reports
  • Euro area banking authorities have told banks to continue planning for Brexit without a transition period despite this week’s agreement
  • A Franco-German company won its bid to print Britain’s new post-Brexit blue passports
  • A poll of German citizens found that 44% are concerned about Vladimir Putin’s politics, compared to 82% for Donald Trump’s policies
  • Brexit secretary David Davis said the progress made in talks with Brussels meant it was now “incredibly probable” that there would be a final deal with the EU

And finally…

A Japanese company has used the latest car technology to develop “self-parking slippers” fitted with sensors and tiny wheels that allow them to detect obstacles and reverse in to pre-programmed places and positions when discarded – Park and stride

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