The acceleration of interest rates is causing growing concern in Western economies over the past several months. Price hikes on energy and consumer goods are hitting peaks we haven’t seen for decades in the US or in Europe. Making matters worse is Russia’s invasion of Ukraine, which has sparked an unexpected crisis among investors, many of whom were hoping to return to an economic ‘normal’ after two years of pandemicggg.
According to economist Jack Leslie, inflation in the UK “could cause the tightest squeeze on the standard of living in the past six decades.” This past month alone, The UK’s Office for National Statistics published data showing that consumers prices have risen at a 5.5% annual rate, the highest since 1992. We’re seeing a similar scenario in Europe, where OSCE data shows that inflation topped out at 7.2% in January 2022, the highest rate since 1991.
The inflation scare, along with worry about the Russia-Ukraine military crisis, are alarming the financial markets, which have always been sensitive to these issues. Central banks, too, are poised to take remedial action by raising interest rates. But the risk is that consumers and companies, who are struggling to cope with soaring costs of utility bills and primary goods will bear the brunt of the consequences.
To explore this scenario, Ipsos ran a recent study in 30 countries to find out how consumers feel about the price increases in the second half of 2021. From this report, one thing becomes immediately clear: at a global level, the majority of interviewees say they’ve been paying more for transportation (70%), food and drink (70%), and utilities and household bills (66%), compared to the six months prior.
In Latin American countries, led by Argentina and Colombia (with 79% and 75% of interviewees), the perception of the effects of inflation is very high. Similar numbers also come out of Turkey (75%), Russia (74%), Poland (73%), South Africa (73%), and Hungary (66%). Consumers who have the clearest sense of rising prices are women, on average (60%), and older (50-74), more affluent people. In contrast, the level of education doesn’t seem to affect the findings.
Poland is the country where the most consumers say they’ve seen higher prices in transportation (83%), followed by Chile, Hungary, South Africa and Russia (81%). As for medical and healthcare costs, at a global level, 51% has seen them go up, but this is less than other cost categories: food and beverage (70%), transportation (70%), utilities (66%), and clothing (55%).
At an international level, 42% of interviewees say that their total household spending, excluding vacations, will change in the near future. Younger, higher-income respondents were the ones who most often reported this perception, but with significant divergence from country to country. Heading the ranking is Romania (62%), followed by Argentina (61%) and South Arica (56%); while the Dutch (28%), the Italians (27%) and the Japanese (16%) who were surveyed seem more inclined to maintain their household spending at the same level.
As far as Italy, on average 54% of Italians perceived a price rise, mainly with regard to transportation (73% of interviewees), groceries (62%), utilities (73%) and clothing (49%). As for family expenses, in the coming months only 27% of Italians think that these costs will rise, while 58% say prices will stay the same and 14% think they will go down – opinions that run counter to the world average.
The Ipsos survey also found that Japan is the only country with a very low perception of inflation: 21% compared to the global average of 59%.