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KPMG Report Shows Consumer Impact of Ongoing Inflation
Still, more households are planning to travel this summer as compared to last year.
KPMG’s latest read on the state of the consumer revealed the ongoing pressure inflation is having on household finances — especially savings.
And while purse strings are tight, KPMG said in its “Consumer Pulse: Summer 2023 Report” that more households have plans to travel as compared to last year's report. That's good news for Main Street retailers and small businesses located in destination areas.
Still, U.S. consumers are fretting over the possibility of a recession.
“More than 70 percent of consumers expect a recession to occur over the next year,” the report's authors said. “Of those who expect a recession to occur, 62 percent indicated that they have a financial plan with the majority preparing to reduce expenses (66 percent) and increase savings (59 percent).”
Regarding inflation, 95 percent of respondents said they continued to experience the pressure of inflation over the past year. This compares to 94 percent in last year's report. The poll also found that 80 percent of those surveyed said their cost of living has swelled by more than 5 percent. “Compared to a year ago, consumers believe that prices increased across all products, especially in groceries (83 percent) and restaurants (78 percent),” the report noted.
The research also showed that 58 percent of respondents have less than $5,000 in their savings accounts, which compares to 54 percent in a KPMG poll done in December 2021.
With income, KPMG said “changes stayed relatively consistent from 2021 to 2022. Lost job and retirement are the top reasons consumers reported a decrease in household income.”
Of those polled who said they experienced an increase in household income, higher salaries and wages or a cost of living adjustment were cited as the top reasons. “Consumer increase in household income is negatively correlated with generation and positively correlated with income segment,” the authors said, adding that households “continue to feel the pressure on spending. Consumers are expected to spend 10 percent more for regular monthly living expenses from May 2021 to May 2023.”
The report noted that consumers are expecting to dole out more money “on essential goods and services in 2023, specifically in groceries, automotive, prescription medications and personal care products.”
But consumers will not be lounging around at home this coming summer. KPMG said consumers' desire to travel “stays strong for summer 2023; 61 percent of consumers plan to travel this summer 2023 compared to 49 percent in summer 2021.” And of those with travel plans, 68 percent are men and 76 percent are Gen Z. Regarding frequency, the authors said nearly 80 percent of consumers polled said they plan to take one to two trips this summer. And 18 percent are eyeing international destinations.
When it comes to preferred travel accommodations, hotels topped the list. But KPMG said, “Gen Zs are more likely to consider Airbnb (or similar platform) or hostels or other shared living residence on vacations.”
When KPMG asked respondents about transportation, 85 percent of those polled said they currently have a gas vehicle, 45 percent use a car for commuting and 47 percent have a car for leisure purposes. Researchers also found that of the consumers who do not currently own an alternative fuel vehicle, “47 percent are considering purchasing an electric or hybrid vehicle due to rising gas prices and environmentally friendly reasons.”
The report also found that close to 50 percent of gas and diesel car owners said they “are considering alternative fuel vehicles; men, Millennials, and higher income households of $100,000-plus are more interested in purchasing alternative fuel vehicles.”