Global attitudes to inflation begin to shift

Around the world, the cost of living (inflation) is rising as larger costs of labour and natural resources drive prices up – this is now starting to affect consumer sentiment at all levels of the wealth spectrum.

Why it matters

Marketers must be concerned with profit, and rising costs mean the margins on higher prices are extremely difficult to maintain.

What’s happening

• Consumers across the world are cutting back. In China, that uncertainty has been affecting purchases since around July. While in Europe, confidence indicators had started to dip heading into 2022.
• In the US, talk of inflation is “no longer transitory” according to the Federal Reserve, which will likely trickle through to trade-downs to major brands' secondary lines. Elsewhere, expect private label to benefit.
• Luxury-focussed outlet Jing Daily observes that even luxury, which has typically been a good way to spend money burning a hole in the pocket of the wealthy, is far less desirable when hard assets like real estate property tend to depreciate less.
• Trickier is the situation for premium brands, whose middle-class audience and customer base will feel a harder pinch.

What it means

A cost of living squeeze could lead to a shock to households similar to a financial crisis. 

Sourced from Morning Consult, European Commission, Jing Daily, WARC