Consumers expect more of the same
We asked consumers to make an assumption about the percentage of income they'd be spending five years down the line compared with today. And this column chart looks remarkably similar across the countries we surveyed. Most consumers do not appear to believe in any sort of base effect. Instead, they expect to spend more of their income on those categories that have already seen the largest increases.
5 years ahead compared to now, I assume I will spend this much on...
Many can't afford to save anymore
More than 80% of consumers reported changes in their savings behaviour, with the vast majority being related to rising prices. Being forced to reduce the amount that goes into savings was by far the most-selected answer in all countries. Depending on the circumstances, it might also make sense from an economic point of view to save less and spend the money on goods before they become even more expensive. But this is not a popular choice among consumers, who instead prefer to save more in order to be better prepared for rising prices. More than 20% in Turkey reported this.
So, while spending on basic needs is likely to simply go up or down with prices and stay more or less constant in real terms, discretionary spending is going to be hit. If prices do come down faster than consumers expect, we might see a bit of a spending spree from those who were able to build up savings in preparation for higher prices that never came. But that's unlikely to affect the overall picture.
Which of the following statements best describes the influence that inflation has had on your saving habits?
Inflation is believed to stay high for longer, especially in Turkey
Turkish consumers have a different kind of experience with inflation than the rest of Europe. So, it doesn’t come as a surprise that only 10% do not have an opinion as to when inflation numbers will come down to a level of price stability; at least 18% selected “I don’t know” in all other countries.
Some Turkish consumers are sceptical; others are fatalistic. The number of 35% for “5 years or more from now or never again” is the survey’s largest, and so are the 10% who already consider current inflation levels to mean price stability, as they are at least a bit removed from 2022’s record levels.
When do you think official headline inflation in your country will come back down to a level that you would consider price stability?
Consumers' assessment of their financial situation shows little signs of improvement
If you don’t believe that the most pressing economic issue will subside anytime soon, you most likely won’t expect things to get better, and European consumers don’t either. Ratings of their own current financial situation on a scale from 1 to 10 compute to an average of 5.4, ranging from 4.6 in Turkey to 6.2 in the Netherlands.
Looking back on their situation five years ago, consumers give an average score of 5.9, with every country seeing a drop of at least 0.1. And the outlook is bleak: Consumers’ expectations for their situation in 5 years average out at 5.2, with no country expecting an upswing.
How would you rate the following?
Consumers were also asked to rate the financial situation of their own peer group and that of their country’s general population over the same time span. Their peers' finances rank a bit lower than their own, with lower percentages for the extreme ends of the scale and a higher one for “I don’t know”.
But the nationwide picture looks alarming: Consumers rate their fellow countrymen’s finances five years ago at just a bit lower than their own. But the current situation and the future look much worse to them, with a drop twice as big as the one they experienced themselves.
What’s striking about this finding is that consumers’ individual perceptions and expectations about inflation don’t appear to tally with what they expect for their economies as a whole. Inflationary pressures, not least in food and energy, have been dominating global news headlines since the war in Ukraine started. That sustained media focus on people’s troubles may well explain the discrepancy.
