The glimmer of hope for a move to a more positive post-pandemic world for consumers has been hit with growing economic uncertainties in the past few months, diminishing consumer confidence once again, according to the latest EY Future Consumer Index.
The ninth edition of the quarterly global survey of 18,000 consumers, conducted in February 2022, finds that the rising cost of goods and services is impacting 52% of global respondents’ ability to purchase goods and is affecting their purchasing decisions.
While, inevitably, this impacts lower-income earners the most (62%), the survey shows that middle-income earners (48%) and high-income earners (42%) are also being squeezed. This is evident across several developing countries in Asia, in which more than 50% of middle-income earners and more than 60% of high-income earners in Indonesia, India and Thailand, respectively, are affected. This further emphasizes that emerging markets are feeling the pinch strongly, with 62% citing affordability affecting their choices (South Africa 77%, India and Indonesia both at 64%, Brazil 63%, China 42%) compared with 45% of respondents from developed markets (US 50%, Canada 52%, UK 42%, France 40%).
Driven largely by the inflationary impact on prices and the anticipation of new COVID-19 variants, the survey shows that consumers will continue to rein in their consumption, trade down to cheaper alternatives, and purchase fewer non-essentials. Some key items where respondents are spending less include clothing (38%), beauty and cosmetics (35%) and alcohol (30%). Many are already seeking cheaper alternatives for fresh food (20%) and packaged food (19%). This trend is reflected among consumers in Indonesia, where purchasing habits remain unchanged only for essentials, being gas/fuel (56%) and fresh food (48%).
Uncertainty around managing rising living costs is driving almost two-thirds (60%) of all respondents to want to save more for the future, with 39% of all respondents having made it a goal already to save rather than spend. The biggest savers are in South Africa (56% of all country respondents), Indonesia (54%) and Mexico, Brazil and Argentina (all at 51%). Consumers in Asian countries where large portion of the population earn income on a daily or weekly basis are becoming more cautious spenders, preferring to save more for the future instead, such as Indonesia (84%), India (81%), Thailand (75%) and China (68%).