Table of contents:

• Holidays 2023: Consumer Spending Forecasts
• Global Economic Overview: Deflation slower than expected, growth stagnant
• developed economies
• Inflation in major markets impacts overall growth
• How do consumers feel going into holiday shopping?
• Looking ahead to 2024
• Our latest articles
• Discuss dynamic pricing with one of our consultants.

 

 

 

If 2023 has taught retail and e-commerce leaders anything, it’s that consumers are adaptable. With inflation forecasts for this year still below real-world inflation rates and global food and gas prices continuing to rise at double-digit rates, consumers are still looking for ways to spend—albeit more consciously and strategically.

The International Monetary Fund (IMF)’s July World Economic Outlook report predicts that the overall global inflation rate will fall from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024. In the US, however, groceries are up 4.9%, electricity is up 3% and rents are up 7.7% through September, creating a stir as the low-spending season begins in the last quarter of 2023.

Despite mixed feedback on factors holding back consumer spending, Omnia found that consumers will once again prove resolute as the final quarter of 2023 begins: strong summer spending in the U.S., year-round spending in Europe’s largest economy Confidence increases. Let’s take a closer look to see if e-commerce and retail can have a prosperous holiday season.

Holidays 2023: Consumer Spending Forecasts
At the beginning of the fourth quarter of 2023, Mastercard’s SpendingPulse report found that consumer spending during the holidays will lead to a 3.7% year-over-year increase in retail sales – a result that is not adjusted for inflation. The report monitors online and offline payments in the retail sector and recognizes the continued resilience of consumers despite the aforementioned deflation and economic growth.

After a better-than-expected holiday season compared to 2022 due to pent-up demand and excess inventory, there could be a rebalancing effect in 2023 as brands and retailers don’t accumulate inventory and consumer demand to meet demand. Count on making additional sales.

“As choice increases and budgets tighten, you can expect shoppers to become increasingly discerning and value-conscious,” predicts Steve Sadove, senior advisor at Mastercard. He added: “The most effective holiday strategy is to meet consumer demand, and personalized promotions for the in-store experience will be key to achieving this.”

E-commerce will gain greater consumer growth than brick-and-mortar stores
The report found that omni-channel shopping continues to grow, but e-commerce shopping will receive greater support, growing by 6.7% year-on-year, while physical store shopping will grow by 2.9% year-on-year. Across verticals, electronics grew the fastest at 6%, grocery grew 3.9% and apparel grew just 1% compared to the 2022 quarter.

 

In the United States, growth is expected to be 1.8% in 2023 and just 1.0% in 2024. The country continues to battle the worst inflation since the 1980s, when the Federal Reserve raised interest rates from 0.08% to more than 5%. March 2022. However, inflation in the United States is gradually easing: in July 2023, the inflation rate was 3.2%, down from the peak of 9.1% in June 2022.

In 2022, the euro area will still be severely affected by the sharp rise in natural gas prices caused by the outbreak of the Russia-Ukraine war, and growth will slow down. It is expected to grow by only 0.9% in 2023 and 1.5% in 2024. Gas prices across Europe will rise by 150% between 2021 and 2022 as Russia, the continent’s largest natural gas supplier, stops supplying gas to the continent. Germany, in particular, is struggling to overcome inflation and energy costs, making it the only advanced economy expected to shrink in 2023.

Growth in the UK is also struggling: after achieving 4.1% economic growth in 2022 (the second-highest among advanced economies), the country is expected to grow by just 0.4% in 2023. The inflation rate in July this year was 6.8%, the lowest level since February 2022. This improvement is urgently needed as the UK experienced seven months of double-digit inflation between September 2022 and March 2023.

 

How do consumers feel going into holiday shopping?
Global consumer confidence appears to be improving as the COVID-19 emergency ends and geopolitical tensions begin in Europe, but remains negative in many regions.

Eurozone consumer confidence remained low this summer, but did rise to -15.1 in July 2023, the highest level since February 2022. Consumers’ perceptions of their households’ past and future financial circumstances have improved, as have their expectations of overall economic conditions in their respective countries.

McKinsey data shows that consumer confidence in Italy, Spain and Germany peaked around mid-2023, which is surprising considering Germany’s projected growth rate for 2023 is contraction rather than expansion, something we’ve discussed before of.

 

Across the Atlantic, U.S. consumer confidence reached its highest level in two years in July 2023 and remained stable throughout the summer at the end of the third quarter. This has led to continued growth in consumption, with retail sales increasing by 0.7% from June to July and 3% year-on-year in September.

Meanwhile, the effects of inflation remain: In July 2023, the typical American household spent $709 more on the same goods and services than two years earlier. The good news is that inflation continued to fall throughout the third quarter.

 

Looking ahead to 2024, though
Macroeconomic tensions persist everywhere, but consumers around the world will continue to balance rising price pressures with the desire or need to spend, while governments try to control inflation and stimulate growth. And, while consumer confidence does appear to have improved since the end of the COVID-19 emergency, levels remain below pre-pandemic normal.

In terms of inflation, the International Monetary Fund predicts that the overall global inflation rate will decrease slightly from 6.8% in 2023 to 5.2% in 2024. The group expects core inflation to fall more slowly and moderately than in its 2022 forecast.

The outcome of consumer spending during the 2023 holiday period will depend entirely on a country’s labor market, the rate of deflation and consumers’ ability to access savings or credit. These factors intertwine to create possibilities for consumer spending. As consumer confidence grows (and continues to grow) and consumers remain strong, both e-commerce and traditional retail are poised for a rich shopping season.