Inflation rates are at their highest in decades, and it’s changing the spending and saving habits of consumers as well as their outlooks for the future, per new McKinsey & Company’s Consumer Pulse research.
As the pandemic becomes endemic and inflation remains top of mind, consumers’ confidence in the economy has plummeted to a new low this summer, according to McKinsey & Company’s latest Consumer Pulse research released today.
Despite the US government’s strong jobs report in late July and the waning inflation reported in early August, consumers’ views about the economy remain grim. At the same time, the survey reveals nuanced results: households are also growing their savings – and purchases vary by age group, income level and what they’re buying.
Consumer confidence has gone boom. / Rose Hein
The study was conducted last month among 4,000 US adults. Here are the key findings:
1. The number of people with gloomy perceptions about the economy has doubled
When McKinsey began this research in March 2020, over 80% of people thought that the economy would rebound from pandemic levels or be impacted for six to 12 months maximum. Now that inflation has climbed to its highest rate in 40 years, however, the number of people anticipating a devastating recession has doubled, per the study. That finding is consistent with reports from The University of Michigan, which has tracked consumer sentiment since 1952 and reported record-low sentiment this summer.
2. Consumers are trading down across categories
As prices continue to rise, consumers are adjusting their shopping habits to include more value-based buying, like buying more in bulk and delaying purchases.
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3. Baby Boomers are more concerned about inflation than Gen Z
About 75% of Baby Boomers expressed concern about the economy, compared to less than 50% of Gen Z. Instead, Gen Z expresses more concerned about political and personal causes, according to the findings.
4. Consumers have more savings now than they did before the pandemic
One positive outcome of the study is that households generally have twice the amount of cash equivalents than they did before the pandemic, and during the first quarter of 2022, higher and medium-income consumers continued to increase their savings.
5. Although the economy is gloom and doom for most consumers, some continue to spend
About 75% of consumers are cynical about inflation. Data suggests that some consumers are not holding back on their spending, especially when it comes to essentials.
6. Besides gas and groceries, consumers’ perceptions of inflation are not reflective of real inflation-induced changes
The survey suggests that consumers are seeing inflation in places where it’s not occurring, while consumers do not notice more inflation in other categories.