The Effect of Inflation on Consumers and What It Means for Brands

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 Several key factors have created the “perfect storm” for rising inflation, including high energy costs, supply chain problems, and heightened consumer demand, as Toby Clark, Director of EMEA Research at Mintel explained in the podcast interview. In addition, the war in Ukraine will almost certainly drive prices even higher.

The Varying Rates of Inflation Across the Globe

Asia-Pacific looks somewhat different. Rising prices are a concern in Australia with inflation at 3.5%. Although China is facing supply chain problems, inflation just isn’t seen as an issue for consumers. Japan also has low inflation compared to Europe.

In contrast, the US has recently registered 7.5% inflation, Canada is at 4.8%, while Brazil comes in at 10.4%.

The Effect of Inflation on Different Types of Consumers

High-earning consumers were able to build up savings during the pandemic by cutting out expenses for travel, commuting, restaurants, night life, and entertainment. Inflation will be less of a problem for this group of consumers anyway, because they have more flex in their budget. Rising prices will be an irritation, but it won’t tip them into crisis, according to Clark.

The Response of Central Banks to Inflation

The big concern for consumers is what this means for borrowing rates. However, for many consumers, higher borrowing rates will have a delayed, slow-motion effect. Those with fixed-term mortgages won’t feel the impact of higher rates, and others may have a chance to adjust. Even with consumer credit, such as a credit card with a 17% APR, slightly higher rates will be obscured in the overall bill. Higher rates will start having an effect and make life more difficult to a degree, but it won’t be an immediate emergency.

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