Spending continues to grow under high inflation! Here are where Americans' money will flow in the future

Under the current international situation and macro-environment with multiple uncertainties, sellers must keep up with consumers' rapidly changing consumption attitudes and behaviors more than ever before.

On May 8, McKinsey & Company released the results of the latest U.S. Consumer Pulse Survey, which was conducted between February 25 and March 1, 2022, and surveyed more than 2,100 U.S. adults. The following are the main results of this survey.

Americans still maintain "high consumption" despite high inflation

In early 2022, U.S. consumers continued to increase spending amid record inflation. The U.S. inflation rate increased to nearly 8.5% in March 2022, with the highest inflation rate in a decade between May 2021 and March 2022. However, U.S. consumers spent 18% more in March 2022 than two years ago and 12% more than predicted before the pandemic.

The survey showed that most of this spending came from consumers' savings and credit cards. People in every age and income group spent more, but millennials (17%) and high-income consumers (16%) had the highest year-on-year spending growth.

Spend more on certain categories

In some categories, most of the growth seen in February and March 2022 was due to higher sales, with inflation accounting for only a small portion of the growth, especially in sportswear, pet supplies, cosmetics, and electronics.

Consumer confidence, which had been rising steadily through 2021, fell in February 2022 in light of ongoing inflation and the war in Ukraine. Only 38% of respondents said they felt optimistic, down from 44% in October 2021.

The biggest drop in consumer confidence occurred among higher-income consumers, a group that often purchased more expensive products and brands in 2020 and 2021, but that may now change.

Brand loyalty is declining

The report said that since the outbreak, more American consumers have turned to different brands and retailers in 2022 because more and more people are looking for low-value goods. Price is the primary motivation for consumers to change brands, followed by inventory.

At the same time, brand purpose now has less influence on consumer purchases than it did in 2020. On the other hand, the importance of novelty has steadily increased. Consumers are keen to try something different, and innovation is imperative for brands that want to win over consumers.

Omnichannel shopping is becoming the norm

Contrary to predictions by some in the industry, the rise of online shopping has not made physical retail obsolete. In fact, in-store spending is recovering at a healthy pace, up 8% year-over-year in March 2022, compared with about 5% at the start of 2021.

Spending in online channels continues to climb, with e-commerce growing 27% year-over-year in March 2022, and a total increase in e-commerce penetration of 33% from the start of the pandemic to March 2022.

In addition, 45% of consumers said that social media is influencing their purchasing behavior, especially in categories such as cosmetics and sportswear. It is reported that 10% of omnichannel consumers have purchased directly through social media, which is an increasingly important channel.

The “stay-at-home economy” is still hot

Even though more than half of U.S. consumers have resumed normal outdoor activities, they haven’t stopped making their homes more attractive and comfortable, with spending on home improvement and maintenance still growing.

ESG consumption concept prevails

U.S. consumers remain concerned about ESG, and when choosing which brands to buy, consumers, especially younger generations, say their choices are at least partially influenced by environmental, social and governance (ESG) factors.

More than two-thirds of young respondents said at least one aspect of ESG was very important to them. They cared most about companies being transparent and showing that they cared about people (employees, customers, others in the community).

In general, younger consumers prioritize authenticity and social issues such as diversity, equity and inclusion, while older consumers are more concerned with health and environmental issues. Today, with inflation prompting many consumers to switch brands, companies that can meet consumers' expectations for value and values ​​will be most likely to succeed.

Editor✎ Ashley/

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