Exploring consumer confidence levels
Knowing how concerned consumers feel about their financial position – and how and why this may change – unlocks valuable insights into market dynamics.
To understand overall consumer confidence amidst the cost-of-living crisis, consumers have been segmented into three groups based on their financial outlook.
In Europe, France has the greatest proportion of consumers who are Feeling the Pinch, despite recording one of the lowest inflation rates across Europe. There are several reasons for this: wider political unrest in France owing to the recent pensions reform, strikes, and government instability.
Consumers in Germany and the UK are less concerned than their Southern European counterparts, which most likely reflects the stronger government support they are receiving towards their energy bills. Italy has one of the highest inflation rates in Europe, as well as one of the greatest unemployment rates.
Conversely Spain’s inflation rate is one of the lowest, so the heightened concern among its consumers is more likely attributable to wider macro factors including an impending election and lower average wages.
Consumers in the US are more polarised than in other markets. Inflation is frequently discussed in government, and the Federal Reserve has been quick to raise interest rates. Recent banking troubles may yet dampen the economic mood.
In Asia, which has been mostly protected from inflation, Mainland Chinese consumers are less worried about its impacts, reflecting the low rate of 1%. Consumers in ‘recession proof’ Australia are also feeling less concerned, with 12% within the Safely Secure segment. The mood in Japan, on the other hand, is less confident, reflecting the country’s relatively high inflation rate.
It’s important to be able to track the movement of people from one segment to another over time, to provide a view of how consumer confidence is changing and the implications this has on market dynamics.
The latest data shows us that the number of consumers who are Feeling the Pinch globally has decreased in recent months, despite high inflation rates that are refusing to abate. This suggests that they’re becoming desensitised and resigned to rising inflation due to repeated and prolonged exposure to the trend. As a result, they’re feeling less concerned about it.
In total, 67% of consumers who were Feeling the Pinch back in October 2022 are still struggling, while 28% have moved to Cautiously Coping and a further 6% are now part of the Safely Secure cohort.
Within Cautiously Coping – the largest segment globally – the status quo has largely remained, with three quarters of consumers staying in this group. 13% have moved up to Safely Secure, while financial concerns have increased for the 12% that are now Feeling the Pinch.
Around two thirds of the consumers who were Safely Secure back in October 2022 remain so. Concern surrounding inflation has increased for the residual third, with 28% moving to Cautiously Coping and a further 7% falling straight to Feeling the Pinch. The fact that so many of this group feel more anxious than they did three months before may appear to be a cause for worry – but this doesn’t necessarily mean they won’t make a purchase.
