The latest Consumer Pulse survey from McKinsey & Company shows that consumers are of two minds—embracing new habits and reverting to old ones. Here are some highlights from the report.
Inflation hasn’t stopped consumers from spending—yet. Inflation grew to nearly 8.5% in March 2022. The period from May 2021 to March 2022 showed the highest inflation in a decade. Yet, consumers spent 18% more in March 2022 than they did in March 2020 and 12% more than forecasted.
McKinsey says the spending was “perhaps not surprising” since Americans had about $2.8 trillion more in savings than they had in 2019. And credit card debt is now rising as well. While consumers in every age cohort and income group spent more, but year-over-year spending growth was highest among millennials (17%) and high-income consumers (16%).
Most of the spending in February and March was for products, not services or experiences. In fact, “spending on goods was higher than pre-pandemic levels,” while spending for services was 2% lower than it was pre-pandemic—a pattern, McKinsey says, that will likely continue until more people feel comfortable being in crowds and attending public indoor events.
The “loyalty shake-up” continues. More consumers say they switched to different brands and retailers this year—more than at any time since the Covid pandemic began—and most will continue to incorporate that behavior into their routines. Price is their primary reason for switching—they’re looking for value.
Novelty is also a powerful motivator. Consumers want to try something different, making innovation an imperative for businesses that want to win (or win back) customers. McKinsey suggests, “combining innovation with the perception of better value could be a particularly attractive offer.”
I’ll write more about these new shopping behaviors next week.