A new 11-country Ipsos survey with the World Economic Forum reveals high levels of public economic pessimism in the face of a high cost-of-living crisis. Twenty-five per cent of the public say they are finding it quite or very difficult to manage financially these days.
For example, two thirds of Turkish citizens (66%) and 16% of those in the US and Germany find it difficult to manage. The largest group say they are “just about getting by” – 34% overall and over half (54%) of those in Poland. Just 11% say they are living comfortably and three in ten (29%) feel they are doing alright.
Public outlook for the year is negative
• In only three countries – the US, Australia and Canada – do more people say they expect their standard of living over the next year will rise rather than fall. The net score (the proportion who expect their living standards to rise, subtract the proportion who say they will fall) is especially low in Turkey (-44), followed by Japan (-27), France (-22) and Great Britain (-21).
• Few expect their disposable income to rise. The most positive country on this measure is the US where 26% say they think their disposable income will rise, although a larger proportion (33%) expect it to fall. Turkish and British citizens are especially negative, with six in ten saying they expect a fall in their disposable incomes (63% and 60% respectively).
• In seven of eleven countries, a majority say they are concerned about their ability to pay their household bills over the next six months. This includes almost three quarters of Turkish people (72%) and six in ten people from Poland (62%), Great Britain (60%) and Spain (59%).
Expectations of price rises widespread – especially in food and cost of utilities such as gas and electricity
• Across the eleven markets, almost four in five people expect the cost of their food shopping to increase (79%). Concern about rising food prices is highest in Great Britain, where almost nine in ten expect an increase in costs (88%).
• Over three quarters of citizens in the 11 markets expect rises in utility bills (77%). Britons are again the most likely to say they expect an increase in these costs (89%), followed by the French (85%), Germans and Poles (both 84%). Expectations are lowest in Japan (55%), but this is the category in which the Japanese public are most likely to say they think costs will rise.
• Just under three quarters say they expect an increase in the costs of motoring fuel (73%), with Turkish (81%) and Polish (79%) citizens the most likely to say they expect rises, followed by Italians (78%).
For most countries, a rise in food prices is the area households say would have the biggest impact on their quality of life – this is the case for the US, Canada, Italy, Japan, Australia, Poland and Turkey. In the remaining four countries (Britain, Italy, Germany and Spain) an increase in utility bills would have the biggest effect.
The most common public responses to rising costs revolve around cutting spending rather than changing behavior. The top three most common actions the public say they would take if price rises meant they were no longer able to afford their normal lifestyle are spending less on socializing (44%), delaying large purchase decisions (41%) and spending less on non-food household shopping (38%).
Some countries are more likely to say they will change their behavior to help save money. While 36% across the eleven markets say they would use less heating, electricity or water, half of Britons say they will take this action (49%), as do 46% of Germans and 44% of those in Turkey.
And while three in ten overall say they would use a car or motor vehicle less (29%), those in Turkey, Germany and France are more likely than average to say this (42%, 34% and 34% respectively).
By contrast, relatively few say they would ask for a pay rise or look to move to a higher paying job in response to the rising cost of living. These rank below a range of other approaches including spending less on socializing (45%), using less heating electricity and water (34%) and spending less on food (27%).
Among those in employment in the 11 countries, just sixteen per cent say they would look for higher paid work with another employer and eleven per cent say they would ask their current employer for a pay rise.
• These responses are more common in some countries. For instance, in Poland a quarter of workers say they would look for a new higher paying job (25%) and 17% would ask for a pay rise, and in the US these figures are 20% and 15%.
• These figures are lower in western European countries: 15% of Britons say they would look to move job and just seven per cent said they would ask for a pay rise. In France, both options are at 15% and in Germany both are at just ten per cent.
In most countries the public view rising inflation as being driven by external and global factors. Overall, the public are most likely to say that the state of the global economy is contributing a great deal or a fair amount to the rising cost of living (77%), alongside the consequences of the Russian invasion of Ukraine (76%) and followed by the COVID-19 pandemic (72%).
However, the policies of the national government are also seen to be playing a big role. Seven in ten overall say this is a factor in rising prices, including 80% in Turkey, 76% in Poland and 72% in the US, where it is seen as the second-most important contributor.
The actions of companies and individuals rank lower. While 64% overall say businesses making excessive profits is contributing to rising prices it is not in the top three for any countries except Spain (72%). And fewer still see workers demanding price rises as a factor, although in the US almost six in ten mention it (58%).
Ipsos highlights cost-of-living crisis is only at beginning stage
This new survey outlines significant cost of living concerns for the public, as both consumers and citizens. At present they view these pressures as more transitory than most experts predict.
At present they are reacting by cutting discretionary spending, avoiding spending on luxuries and delaying big purchase decisions. The challenge is that while the public are primed for rising prices, after a long period low inflation for many, the reality is likely to be even worse than they expect.
There is the possibility that as the squeeze continues, the public move from cutting spending to demanding pay rises (either from their current employer or moving to a new, higher-paying job), triggering the start of a wage-price spiral.
For brands, displaying empathy among consumers who are feeling under pressure and expecting further cost increases across a broad range of products will be important.
There are clear signs the public will look to cut costs on a range of areas, starting with luxuries and discretionary spending, but there are subtle differences between markets in where the public will look first. Consumers will try and preserve their overall standard of living and “value” will become more and more important in many categories.
In most countries it is clear the public do not see governments and politicians as having primary responsibility for rising prices, but the high level of personal pessimism will drive dissatisfaction with incumbent governments and means the public will be looking for support in cushioning the worst impacts of inflation.
Demonstrating they empathize with the financial pain people are in, and are able to offer practical solutions, will be important, as the French election just showed. As the cost-of-living crisis continues, preparing people for what may happen to interest rates and the steps being taken to deal with high food and energy prices will be vital.
Ben Page, CEO of Ipsos, said: “Economic optimism has been declining in Europe and the US since mid-2021 and now less than half of the public in six of ten countries feel financially comfortable.
“But while public expectations are for more inflation and price rises over 2022, the idea of a ‘new normal’ has not sunk in. This means further inflation shocks are likely – so far relatively few people globally are demanding pay rises or seeking higher-paid employment with a new company.
“But as the cost-of-living crisis grinds on we expect to see this change, with the potential of a wage-price spiral emerging in many markets. This is only the beginning.”
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