The optimism generated by the global economy's recovery has been overshadowed by the persistent uncertainties that have affected consumer confidence.

The rising cost of living has affected the purchasing power of consumers globally. This is according to the EY Future Consumer Index released in February 2022.

The survey revealed that the rising cost of living has affected the purchasing power of middle- and high-income households. In emerging markets, 62 percent out of 18,000 respondents cited affordability as a major factor that has affected their decisions.

Due to the rise in prices, the survey revealed that consumers plan to rein in their consumption and look for cheaper alternatives. Some of the key items they plan to avoid are clothes, alcohol, beauty, and cosmetics.

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Rising living cost leads to more initiative to save
According to EY Global Consumer Leader Kristina Rogers, consumers are still not optimistic about their future despite the economic recovery. For many, this is due to the rising cost of living and uncertainties around global geopolitical issues.

"With their spending power eroding and uncertainties looming, consumers are having to rethink their spending choices, not only around 'nice to have' purchases, but also essential day-to-day goods," Rogers added.

Almost three-fourths of the respondents said they want to save more for the future due to the rising cost of living. The biggest savings areas are South Africa with 56 percent of the respondents, Indonesia with 54 percent, and Mexico, Argentina, and Brazil are at 51 percent.

EY Future Consumer Index reveals more
The survey also indicated that consumers are looking for new experiences and are planning on living more.

Out of the five key spending priorities set by EY – experience, affordability, planet, health, and society – experience has the biggest increase since 2020. It is now third on the list when deciding where to spend their money.

In the US, France, India, and Thailand, experience is the most important aspect of their spending plans. Despite the lack of involvement in their home experiences from 39 percent of the respondents, 42 percent stated that they would be increasing their spending on experiences in the next year.

"Customers are becoming harder to reach and the power is shifting from the brand to the consumer. Consumers originally turned from buying things to spending on experiences out of necessity, but now they see it as an active choice," Rogers noted.

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She also noted that the experiences that are most likely to appeal to consumers are simple to access and require a minimal time commitment. As the customer demands increase, companies need to step up their efforts in delivering more immersive and engaging experiences.