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03 Oct 2022

EY Future Consumer Index predicts belt tightening is the latest trend

Rising cost of living forces consumers to tighten grip on finances and get creative with sustainability

Cost of living crisis

Cost of living crisis will make consumers tighten their belts according to EY

Consumers globally are preparing to hunker down for a long financial squeeze, as the increasing cost of living and geopolitical uncertainties push them to seek financial control amid low economic confidence, according to the latest EY Future Consumer Index (FCI).

The 10th edition of the global research of 18,000 consumers, conducted between 18 May to 7 June 2022, finds that 79% of consumers say their finances are a concern, with 62% expecting their living costs to increase even further over the next six months. These concerns over personal finances are affecting the majority of all income levels, from low income (87%) middle class (77%) to high income (64%).

 

With consumer confidence shrinking, the research reveals a significantly pessimistic economic outlook from the Western markets when compared to emerging/other markets. Many more consumers from the US (54%), UK (65%) Germany (84%) and France (85%) state they believe life will remain the same or worse over the next three years, compared to Brazil (21%), India (24%), Saudi Arabia (37%) and China (38%).

With this continued “always-on emergency mindset” adopted from the pandemic, consumers globally are increasingly focusing on controlling their spending and re-adjusting priorities to maintain their values and lifestyles in the face of disruption.

 

With living costs spiralling each week, the FCI research shows that consumers are demanding affordability, as more than one in three consumers (35%) say they are worried about having enough money to spend on things other than living expenses. Consumers are not simply trading down on their essentials to cut costs, but instead are trying new brands (33%) and switching to private label or “owned brands” (21%), ultimately exposing one-third of a brand’s addressable market to risk.

 

Ivan O’Brien, EY Ireland Consulting Partner says:

“2022 sees a perfect storm brewing, due to rising interest rates, lower savings,  ever increasing energy costs and the return of lockdowns in China that complicate global supply chains. Irish Inflation has risen to levels not seen since the 1980s, and as prices continue to rise there is increased pressure placed upon household budgets throughout the country.”

 

Despite increasing momentum and pressures to live in a more environmentally friendly way, consumers’ efforts are being stunted by the rising cost of living. Sixty-seven percent of global respondents say the high price of sustainable goods and products is significantly putting them off from buying them. However, consumer sentiment toward sustainability has improved compared to May 2021: fewer associate sustainable products with low quality or poor durability and more are increasingly trusting the information about sustainable products from the companies that make them. Consumers are seeking new methods of conscious consumption with 87% of respondents trying not to waste food and 36% saying they will buy more second-hand products, up from 30% in February 2022.

 

Driven by the current demand for affordability, consumers are substituting non-essential spending categories and looking for alternatives, making what they have more sustainable. Sixty-four percent of global respondents state they no longer feel the need to keep up with seasonal fashion trends, and more (69%) are attempting to repair their belongings rather than replace them, presenting a challenge to fast fashion retailers as they target a more conscious consumer. Sixty percent of respondents say they are more comfortable in their own skin, relying less on beauty and cosmetics to boost confidence, up 7% from October 2021.

 

Ivan O’Brien says:

“Irish consumers are responding by becoming more prudent in their weekly grocery shop, holding on to clothes a little longer and reducing their spend on hospitality. Our urge to embrace sustainable products is also challenged, as inflation forces push consumers to re-prioritise how they spend. It is very likely that some new frugal lifestyle habits will stick.”

 

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