Consumer Pulse Q2 2022

Economic Pressures

As 2022 crests the halfway point, consumers are weathering yet another economic crisis. Over the course of the last six months, consumers saw inflation soar (possibly reaching over 10%1), largely driven by the war in Ukraine, ongoing global logistics shortages, and a tight jobs market. Low-income consumers (many already in financial distress) especially felt the deepening impacts of April’s 54% Energy Price Cap hike, and may find the expected October hike hard to handle. These pressures have caused the Bank of England’s rate rises, subsequently increasing not only the price of everyday goods but also the cost of credit for the average consumer.

Consumer Spend

With the cost of living crisis putting pressure on household disposable incomes, over 50% of the consumers surveyed indicated they’d already significantly reduced their expenditures, and intend to reduce them further as the year progresses. Whilst all spend categories were impacted, respondents indicated intent to significantly decrease discretionary and retail spend activities. This will have far-reaching implications for the retail sector and consumers’ quality of life. Where spend reduction doesn’t suffice, a good proportion of consumers indicated they’d dig into savings.

Consumer Debt and Vulnerable Populations

Even with spend reductions, a sizeable portion of consumers were already experiencing financial distress — especially acute amongst low-income brackets where over a quarter (27%) of respondents expected to be unable to pay their bills and credit commitments in full. Thanks to consumer belt-tightening, the credit market hasn’t experienced the expected increases in arrears events, but there appeared to be an observable uptick in demand for unsecured credit, possibly driven by demand from vulnerable populations. Early warning signs were there; consumer sentiment plummeted, and the buffer allowed by savings and expenditure reduction appeared to be cracking.

The Cushioned Population

Within the doom and gloom of this cost of living crisis, it’s worth keeping sight of the large portion of the population who remained financially stable and more than able to weather the storm. Seventy-three percent of consumers responding felt they would be able to pay all their upcoming bills and credit commitments in full; 25% reported increases in income in the last three months; and 29% expected to see an increase within in the next year.