Historically, most banks have strived to keep inflation at a constant but low rate ranging between 1.5% and 4%. However, 2022 saw a global inflation rate of nearly 9%, which is more than double the maximum target inflation rate.
High inflation pushes consumers to rethink their spending habits, tighten their wallets, and pass up on nonessential items so that they can cover the costs of necessities like food and fuel.
During the height of 2022 inflation, consumer confidence plummeted. The good news is that global consumer confidence is on the rebound. In December alone, the Index of Consumer Sentiment saw a cumulative 1.8% increase. Of the 43 countries tracked, 31 saw improved consumer sentiment due to low unemployment and slowing inflation rates.
Take a closer look at what shifting consumer confidence trends mean for your business — and how you can capitalise on them.
Understanding Consumer Confidence Trends
A consumer sentiment index measures how consumers feel about the economy.
Consumer confidence is an excellent tool for predicting consumer spending habits over the next six to twelve months. If confidence is low, consumers are less likely to make big purchases or buy items that aren't a necessity. Conversely, if confidence is high, consumers are more apt to shop online, buy new vehicles, and splurge on other large-ticket items.
In a 2022 report, McKinsey provided insights into how consumer sentiments have shifted since early 2020. In March 2020, about 15% of respondents reported that they were pessimistic about the state of the economy, and 40% characterised themselves as optimistic. The remaining 45% had mixed feelings about the economy.
By July 2022, inflation was running rampant. The surge in inflation caused consumer confidence to plummet, with 30% of respondents reporting that they were pessimistic about the state of the economy. During that same period, only 26% of respondents expressed optimism that the economy would rebound within the next two to three months.
According to the Organisation for Economic Co-operation and Development, consumer confidence bottomed out in July 2022 and remained consistently low for the next two months. However, October marked the beginning of the current confidence upswing, which continued to gain momentum throughout the end of last year.
What Rising Consumer Confidence Means (and Doesn't Mean) for Global Brands
Generally speaking, consumers are more confident about the state of the economy and their personal finances. But what does this confidence mean for global brands?
Here are a few things that you need to know about rising consumer confidence and what it could mean for your business:
Many Consumers Will Begin to Spend More Freely
When consumers are making more or when the cost of necessities goes down, they will have more disposable income to purchase retail goods or big-ticket items. This principle is particularly true if they expect positive economic conditions to persist over the next several months or longer.
If you had scaled down your marketing efforts due to a decline in sales, now may be the time to ramp back up.
Others Will Continue to Practise Tight Spending Habits
Keep in mind that not everyone is experiencing a rise in confidence. Some consumers are still concerned that they will be paying more for essentials, making less money, or a combination thereof.
According to a December 2022 report, 13.3% of consumers expect their income to drop in the coming year. Despite this point, you could make your products more appealing to everyone by offering sales or discounts.
2023 Will Provide an Opportunity to Bolster Sales
The bottom line is this: Rising consumer confidence presents a prime opportunity to bolster sales and recoup any revenue you lost during the past year. However, in order to accomplish that, you will first need to connect with the right markets.
The best way to connect with your target market and bolster sales is to partner with the global team of partnership marketing professionals at Acceleration Partners.
How You Can Capitalise on Consumer Confidence with AP
Acceleration Partners is a global partnership marketing agency that has teams located in more than 40 countries. We can help you pinpoint audiences in nations that are experiencing the largest rise in consumer confidence so that you can boost sales and increase cash flow.
We know how to capitalise on emerging market trends while building marketing programmes that are resilient enough to thrive in rapidly changing economic conditions. If you're re-evaluating your marketing budget for 2023 to account for shifting consumer behaviour, Acceleration Partners can help you scale in a profitable way through partnership marketing, strategically leveraging the rise of consumer confidence.