The start of 2022 has seen the COVID-19 threat replaced by the conflict between Russia and Ukraine, driving global commodity prices upwards, increasing inflation and putting severe cost of living pressures on households.
IGD’s latest issue of Viewpoint: Conflict Compounds the Cost of Living Crisis looks at the threat inflation now poses to the spending power of households and the further pressure expected in the forthcoming months. The report also discusses the lasting impact of COVID-19 on the finances of government, businesses and households.
Shopper confidence reached a new all-time low of -23 in March, according to IGD’s Shopper Confidence Index. Confidence is being influenced by factors such as fuel, energy, food and national insurance. With inflation reaching a 30 year high in April, 90% of shoppers expect food prices to rise in the next 12 months and 50% expect prices to get more expensive compared to just 12% in March 2021.
Naomi Kissman, Social Impact Director at IGD said, “The Ukraine conflict has accelerated inflation, which is being passed through to UK shoppers in the form of much higher living costs. For many, inflation is outstripping income and prosperity is declining. We believe that this economic phase has a long way to run – inflation may peak higher and last longer than official forecasts suggest.
“Consumer confidence is very low and we also expect this to dip further in the coming months as shoppers come under increasing financial pressure. As the impact of rising national insurance, food and energy bills takes effect, we expect shoppers to increase their saving money focus.”
While the cost-of-living crisis is impacting all shoppers, they are using different techniques to cope with rising inflation. I.e. households with children are skipping meals more often, lower affluence shoppers are more likely to increase their use of food discounters and cut back on eating out, while higher affluence shoppers more likely to plan their meals.
Faced with increased financial pressures, shoppers are shifting their focus to saving more money in the year ahead. 37% expect to focus more on saving money this year compared to 14% in March last year. This compares to 10% who expect to focus more on quality (versus 18% in March’21).
Kissman added, “Businesses will need to align their offer with changing shopper preferences. Managing household budgets is set to become more difficult for a significant number of shoppers and they will be looking to business and government for help.”