Consumers worldwide are expecting to trade down to cheaper alternatives and purchase fewer non-essentials as they contend with soaring inflation, with more than half saying their purchasing ability has already been constrained by rising prices, according to accountancy giant EY.
The EY Future Consumer Index, a quarterly global survey of 18,000 consumers, found the rising cost of goods and services is having an impact on 52 per cent of consumers’ ability to purchase goods and is swaying their purchasing decisions.
A fifth said they were already seeking cheaper alternatives for both fresh and packaged food.
Some 38 per cent said they were spending less on clothing, 35 per cent had reduced their beauty and cosmetics spending and 30 per cent had cut their alcohol purchases.
Affordability
Consumers in emerging markets are more likely to be affected, with 62 per cent saying affordability was dictating their choices compared with 45 per cent of respondents from developed markets.
"Despite an economic uplift in many countries since the pandemic, consumers are not optimistic about their future due to inflation, fundamental changes in their work and personal lives, and a growing unease around current global geopolitical issues, a trend we are also seeing here in Ireland, " said EY Ireland consulting partner Ivan O'Brien.
“With their spending power eroding and uncertainties looming, Irish consumers are having to rethink their spending choices, not only around ‘nice to have’ purchases, but also essential day-to-day goods and services.”
Lost time
The survey also found that consumers are seeking experiences rather than “things” more than ever before, as they make up for lost time and look for escape from the pressures of the world. Some 45 per cent told EY’s survey, conducted between January 28th and February 15th, that they planned to live more in the moment.
The desire to save money remains on the agenda for many, however.
“As we spend less on clothing, beauty and cosmetic products, it is not a given that Irish consumers reverse their lockdown instinct to save rather than spend,” said Mr O’Brien.
“The return of inflation is also fuelling confirmation bias, with consumers continuing to engage with cautious pandemic era decision making processes, leading to fewer non-essential purchases.”
