Volatile price action, freak weather contribute to consumer panic

Consumers worldwide are on edge due to the volatility in everything, from prices to weather events which unsettled them after they just lived through recent inflation highs, while they do not know when to brace for the next set of extreme circumstances.

This cautiousness is expected to linger for some time and the picture does not look any better for South African consumers, with 41% feeling they are in a worse financial position compared to a year ago which is fairly in line with the global average of 40%.

In addition, 74% of them are increasingly burdened by the high cost of living, while 42% say they were affected by the economic slow-down and 32% that they faced huge changes adapting to ongoing pandemic disruptions according to the latest NielsenIQ Thought Leadership Report on Consumer Outlook 2023.

It is clear that consumers do not think there is much to look forward to in 2023, with 40% of local consumers saying they are in a worse financial position this year compared to a year ago although they still plan to spend money on the basics.

ALSO READ: Even tougher financial times ahead for consumers, warns Banking Ombudsman

Almost half of consumers globally are worried

Globally, 43% of surveyed consumers said they already feel like they are living in a recession, 74% said increased cost of living is to blame for their recent financial struggles, 48% mentioned they only have enough money for food, shelter and the basics and 32% turned to online shopping to get better deals, save on fuel and minimise shopping trips.

In South Africa, 37% of consumers said they expect the economic downturn to last for 12 months or more, with 26% claiming they only have enough money for food, shelter and the basics, while 51% said their biggest concern over the next 6 months is the increase in food prices and 20% were worried about job security.

With fuel prices expected to increase again, 29% of local consumers plan to spend more on transport compared to 2022 and even with the additional burdens on family spending, 48% are still planning to spend as much on groceries and household items in 2023 as before.

The continuous increase of inflation and higher prices also pushed 49% of the participants to discounters, 36% to chasing promotions and 50% to buy in bulk, while 56% are very keen to take advantage of loyalty schemes. 32% also turned to online shopping to get better deals, save on petrol and minimise trips to stores.

ALSO READ: Consumers worse off now than in 2016, as debt counselling inquiries increase by 53%

Local consumers plan to cut discretionary spending

Another sign that consumers are struggling is evident from the fact that participants plan to spend less on most discretionary spending categories, with 23% scrapping eating out, 32% staying away from out-of-home entertainment (32%) and 36% are spending less on clothing.

Overall, financial concerns and job security are setting the tone for consumers in 2023 and at the same time mental and physical wellness are deemed equally important on the global scale. Lauren Fernandez, global director at NIQ Thought Leadership, says it is a mix of financial and health-focused priorities.

“We cannot forget that within this trifecta of priorities, our financial wellness is often what feeds our ability to service and nurture mental and physical health. As a result, the financial focus of today’s consumer outlook comes to the forefront.”

In 2023, it seems that South African consumers will shift spending towards maintaining contributions to future-focused mainstays, such as financial services (50%) and paying off debt (35%), while also increasing their spending on groceries and household items (33%) and contributing more to education for themselves or their families (23%).

Fernandez says 42% of those surveyed mention that financial health and job security are on par with mental and physical wellness (40%) as the leading areas of greater.