Store price inflation hits new high
Annual store price inflation accelerated to 4.4% in July from 3.1% in June, according to the latest BRC-Nielsen IQ store price index.
This figure represents the highest rate of in-store price inflation since the index began in 2005 and significantly exceeds the 12- and 6-month average price increases of 1.5% and 2.8%, respectively.
Food inflation fell from 5.6% to 7%, the highest rate since May 2009, as the war in Ukraine led to a sharp increase in the cost and availability of animal feed, fertilizers and products. According to Helen Dickinson, CEO of the British Retail Consortium, some of the biggest price increases have been seen in dairy products, including lard, cooking fats and butter.
Non-food inflation fell from 1.9% to 3%, a new record. Prices were hit by rising shipping prices, production costs and continued disruptions in China, Dickinson said.
“As inflation hits new highs, retailers are doing everything they can to absorb these rising costs as much as possible and to seek efficiencies in their operations and supply chain,” he explains. -she.
“Nevertheless, households and businesses need to brace for tough times as inflationary pressures hit home.”
Mike Watkins, head of retail and market intelligence at NielsenIQ, says the grocery industry “in particular” is under intense pressure as it tries to “protect” customers from inflation.
“At the same time, there has been an increase in competitive intensity, so retaining customers during the summer holiday season will be key to helping stem any further declines in volumes,” it adds. he.
Source: BRC/Nielsen IQ
UK Q1 ad spend ‘exceeds expectations’
Advertising spend in the UK in the first quarter of 2022 rose 28.3% year-on-year to a total of £8.6bn ‘beating’ expectations, according to the latest spending report from the UK. Advertising Association/WARC.
This figure is 7.7 percentage points higher than the previous April forecast as all media recovered from the lockdowns suffered in the first quarter of 2021.
As a result, the outlook for the entire UK advertising market in 2022 has been raised (+0.2 percentage points) to 10.9% growth, with advertising spend expected to reach a new high of £35.4 billion. sterling. These figures also reflect what the AA/WARC describes as the “steady growth” of online advertising, which is expected to account for 74.3% of all spending in 2022, up from 73.5% last year.
Online formats – including search, display (including social) and classified – grew the most in absolute terms, with market share reaching 74.9% for online channels combined. Three- and four-digit recoveries were seen in the outdoor and cinema sectors, respectively. The publishing and direct mail sectors also experienced growth during the first quarter, which translates into better prospects for the year ahead.
However, despite the “encouraging growth” in most sectors, the impact of inflation means that real growth in the UK advertising market is only expected to be 1.8% in 2022. AA/WARC predicts that erosion margins due to increased costs could affect marketing budgets. , with inflationary pressures likely to continue through 2023.
Based on this latest data, the UK advertising market is expected to grow a further 4.4% in 2023, to a value of £37 billion. However, this figure is one percentage point lower than the April forecast and is equivalent to a contraction of 0.9% in real terms. Due to continued inflationary pressures, coupled with the level of geopolitical uncertainty, AA/WARC warns that the UK advertising market is likely to see “further headwinds on the horizon”.
Millennials are the most price-conscious generation
Millennials, those aged 26-39, are the generation most likely to describe themselves as price-conscious (41%) and good at managing money (37%). However, despite being aware of their finances, millennials also admit to making quick decisions (35%) and they are also the generation most likely to buy items at full price.
Millennials are also a health-conscious generation, with more than two-thirds saying they exercise regularly and the number of those who eat fast food is steadily declining.
This generation is also starting to spend less time online on mobile and desktop, with that figure dropping by 38 minutes since its peak in 2017. Time spent online is down six minutes from 2021, with GWI suggesting this could be influenced by the fact that Millennials’ commitments and priorities are changing. In the first quarter of 2022, 62% of 26-39 year olds were parents, and the number of people in management and leadership positions has increased by 20% since 2020.
Jason Mander, Director of Research at GWI, says: “While Millennials cover a diverse age group – 13, people aged 26-39 – it is a generation that came of age at a time of enormous change and major world events. The “Great Recession” of 2008, the Covid-19 pandemic and, more recently, the cost of living crisis have all had a profound effect on their way of life, in particularly on their buying and saving behavior.
“What’s important for brands to keep in mind is that this is a generation that has been exposed to a turbulent financial landscape. And the turbulence is not over yet. It is clear that this is a generation aware of its responsibilities, but which still wants to enjoy life, take care of it and take risks in terms of investments.
Households have 12.1% less money to spend on non-essential goods
The amount of spare cash the average family had to spend in June fell by £135, down 12.1% from a year ago, according to the latest data from Retail Economics-HyperJar Cost of Living Tracking.
Across the economy, this equates to £3.9bn as spending on non-essential items is limited.
As a result, two-thirds (32.7%) of UK households say they now have strict limits on how much they spend on food each week.
The poorest households have been hardest hit, with spending inflation in June hitting 12.1%, higher than the official rate of 9.4%, as people in this bracket spend a disproportionate share of their income on food and fuel.
Less well-off households have seen their cash on hand drop by 15.6%, equivalent to £77 less a month to spend on non-essential items. Wealthier households, meanwhile, saw their available cash fall by £146 a month, a 3.2% drop.
In addition to limiting spending in food outlets, three-quarters of people also plan to reduce take-out (74.1%), while 72.8% of households expect to eat less in restaurants. Holidays (51%), cinema outings (47.2%), day trips by car (45.8%) and local trips by car (39.7%) will also be limited.
Richard Lim, CEO of Retail Economics, says: “The amount of cash available to families continues to disappear at an astonishing rate, especially for the most vulnerable in society. Many households have no choice but to cut back on discretionary spending across the board as their financial situation plunges into the red.
“For others, the gloomier economic outlook has encouraged a much more cautious approach to spending and they are negotiating and delaying in many discretionary areas.”
Source: Retail Economics/HyperJar
Global economy ‘wobbles’ in recession
The International Monetary Fund (IMF) has lowered its growth projections for this year and next, warning that the global outlook has “darkened considerably”.
A “tentative” recovery in 2021 has been followed by “increasingly bleak” developments this year, including higher-than-expected global inflation, rising interest rates, the impact of the war in Ukraine and a slowdown in Chinese growth.
Thus, the IMF predicts a slowdown in global growth from 6.1% last year to 3.2% in 2022, 0.4 percentage points less than forecast in April.
The UK is now expected to grow by 3.2% in 2022 and just 0.5% in 2023, down 0.5 points and 0.7 points, respectively. The UK is expected to be the weakest of the G7 economies in 2023, with Italy expected to grow by 0.7%, Germany by 0.8%, France and the United States by 1%, Japan by 1.7% and Canada 1.8%.
“The outlook has darkened considerably since April. The world could soon tip over to the brink of a global recession, just two years after the last one,” chief economist Pierre-Olivier Gourinchas warned at the launch of the IMF’s latest World Economic Outlook report.
“In particular, a complete shutdown of Russian gas flows to Europe or inflationary pressures that remain higher than they have been in the past. And we have been repeatedly surprised by the persistence and widening of inflation lately, as well as an increase in financial tightening around the world.
Gourinchas said multilateral cooperation between countries will be “key” in areas ranging from climate transition to food security and over-indebtedness.
“In a context of great challenges and conflicts, strengthening cooperation remains the best way to improve economic prospects for all and to mitigate the risk of geo-economic fragmentation,” he added.