Inflation and economic uncertainty are taking their toll on increasingly polarized consumption patterns in Spain, warns the study Everything is terrible, but I’m fine (Spanish in the cost of living crisis), by IESE professor José Luis Nueno and edited by the Association of Consumer Goods Companies (Aecoc).
The book, whose conclusions were presented here, indicates that young people live in a permanent crisis and seem “resigned to consuming clothing, restaurants, leisure and low-cost tourism.” Therefore, considers Nueno, the main problem of the Spanish economy is the lack of “replacement consumers”. After analyzing a Fintonic and Intent HQ database with 250,000 consumers and 190 million purchase acts between January 2022 and April 2023, he notes that both extremes of consumption are growing and both brands and luxury goods as well as cheaper stores.
The economic context pushes this. Inflation last year was 20% higher for citizens belonging to the lowest income quintile (less than 9,215.6 euros) than for those in the upper quintile. For this reason, the first and second lowest quintiles are cutting their spending levels, while those belonging to quintiles 3, 4, and 5 are increasing them. In fact, the study points out, it is estimated that this year in Europe spending on luxury items will increase by 12% (including spending from returning Chinese and Japanese tourists).
The IESE business management professor also notes a slowdown in consumption towards the end of the year. After a summer that all analysts point to as a record, consumption in recent months will be marked “by caution and rationality.” And it is that almost half of the population feels impoverished and declares itself concerned about the impact on its economy of the rise in interest rates (69%) and the persistence of inflation (55%), indicates the book.
Consumers also have a per capita disposable national income of 19,817 euros and spend 22,598; therefore, in aggregate terms, they spend more than they earn. And it is that, “despite the positive trend in job creation, salaries are growing more slowly than inflation and not fully absorbing the latter,” he underlines.
In this sense, the author affirms that the post-pandemic consumer, to face the cost of living, cuts “in what he wants to continue spending on what he can”. The discretionary categories that have grown the most are clothing, footwear and restaurants, compared to drops in delivery, education and culture or hairdressing and beauty salons.
