Confronted with continued instability, consumers unsurprisingly demonstrate more rational purchasing behavior, which goes way beyond pure shopping as people are being forced to change their lifestyle altogether. For 73% of Europeans, saving energy has become a daily routine, nearly one third switched to a cheaper energy source. An alarming 55% of consumers state that saving has become an absolute necessity for them, not only with regards to energy but also daily needs, including food.
If we compare the current financial situation of households to April 2022, we notice a slight increase of up to 38% of Europeans struggling financially, this time especially in Western European countries such as the Netherlands, Austria and Denmark. Similarly, 16% of Europeans (April 2022: 15%) fear for their job, with an increase especially in Denmark, Germany and Serbia.
Slight increase in financial and job worries – especially in Western Europe
A closer look at CPS GfK’s crisis types, that combine financial situation and employment security, shows increased budget concerns: over 60% of European households are in or close to a serious budget squeeze, with especially Western European countries on the rise.
Across Europe,
44% of shoppers are “concerned”, struggling financially and slightly worrying about their job or not working (+1% in November 2022 vs. April 2022),
a constant 18% are “affected”, being highly afraid to lose their job or currently unemployed, whereas
38% of “resistant” shoppers (-1% compared to April) are in a financially comfortable situation with no or only slight worries about their job, or no longer working.
While the crash in consumer sentiment seems to slow down, the rollercoaster of the past months continues: Both economic and income expectations in the EU seem to recover ever so slightly in 2023 after hitting an all-time low in autumn, albeit still quite negative. However, Germany showed the fourth increase in a row in January 2023, so one could assume that consumer climate is starting a cautious rebound, albeit from an extremely low level.
European Consumer Climate goes up slightly at the begin of the year 2023
This slightly positive development is supported by most recent inflation rates. In Germany, for example, inflation decreased for the second consecutive month in December 2022, reaching 8.6%, and an annual rate of 7.9%, after a 10-percent-peak in October1. Similarly, inflation rate in the Euro zone saw a slight decrease from 10.1% to 9.2% in December. According to Eurostat, the Baltic countries still reach the highest rate of 20%, while Luxemburg fell to 6.2% and France to 6.7%, with Spain at the bottom of the list at 5.5%.
1 Source: Federal Statistical Office of Germany
But even with a slight upturn in sentiment, the cost-of-living crisis will persist and throughout 2023 consumers will make a lot of efforts to cut their expenditures further. This budget balancing act will have a strong impact on numerous areas including FMCG: nearly 2 in 3 consumers declare to cut their out-of-home (OOH) spend, rather eating at home, and 59% plan to stick to cheaper brands. After COVID-19 we are now seeing a next phase of “homing-in” within a short period of time.
Industries, products and services hit hardest by these budget cuts will be OOH activities (-54%), including visiting restaurants and bars, clothes (-48%), as well as gifts, decoration and take-away/delivery (all at -46%).
Plan to do much more/much less, next 6 months
For those struggling, cuts go a long way. Obviously, holidays, restaurants and amusement are off their list, but consequences expand well beyond the personal financial situation into the realm of healthy living: consumers feel forced to also spend less on lifestyle treatment and health, including sports equipment and memberships. With consumers being forced to abandon healthy lifestyle choices, a lasting spillover into the public health system already under pressure in numerous countries should not be underestimated. The pandemic forced many to limit or even cancel fun and health activities for almost two years. Recently, only the resistant have been in a comfortable enough financial situation to resume a “normal”, pre-pandemic life.
Nonetheless, virtually everybody (93%) has changed his or her behavior in one way or the other in reaction to inflation and instability. More than 50% choose to eat at home rather than in restaurants, and over 40% are shopping around in different stores, also switching to cheaper brands, including discounter brands. 1 in 3 Europeans have taken measures to save energy and use less water, buy less food/drinks on-the-go or plan recipes according to budget.
Some coping strategies are very common, others specific to single consumer groups or countries. In Italy, for example, more than 50% of consumers use their household appliances to a lesser extent, above all the oven (18% less) and the washing machine (15% less).
For struggling consumers, impulse behavior is a thing of the past and planning ahead is a must: 46% plan recipes according to budget, whereas this is by no means popular among those in a comfortable position. There is a real need for cost-efficient yet healthy meal planning and especially retailers are already promoting respective recipes and cooking programs as part of their personalized consumer dialogue.
