Ukraine and inflation: Consumers weigh in

Ukraine and inflation: Consumers weigh in

April 19, 2022
4 min read

In the Inflation Exploration blog series, Mintel explores all the ways that inflation effects consumers around the globe.

Across multiple markets, consumers are already worrying that the conflict in Ukraine will have an impact on their financial situation. Our research shows real fears about how rising prices will affect household finances, and highlights the likely behavioural changes that people will make in response.

Impact on consumers’ financial situations

Without a doubt, it’s the human cost of the conflict that is the main concern for most people, but as far away as Australia and Thailand, consumers also recognise that it will have an impact on their financial position.

Consumers recognise that very few people will be able to escape the financial consequences of the conflict. In each of the 11 markets we surveyed, more than half of consumers believe the conflict will impact their household’s finances.

Australia, for example, is more than 8,000 miles away from Ukraine, but 57% of Australians still feel that the conflict will have at least some impact on their finances, including 19% who think it will have a major impact.

The interconnectedness of the global economy means that the sharp increase in oil prices and concerns about Ukrainian and Russian agricultural and industrial exports will affect consumers around the world.

However, geography still matters, and European consumers tend to be more concerned about the impact on their finances than those in APAC, although when it comes to the level of concern, the UK sits closer to the US than to its EMEA counterparts.

Most worried of all, predictably, is Poland, which shares a border with Ukraine and has taken the vast majority of refugees so far – more than 2 million by 21 March. 57% of Poles feel that the conflict will have a major impact on their finances.

Consumers’ inflationary concerns

Since the start of the conflict, the costs of oil and natural gas have spiked; wheat, fertiliser and many other commodities will also be affected. For most people, it’s the impact on energy costs that is the biggest concern, but many also recognise that the conflict will raise food prices.

The leading concerns across the markets Mintel surveyed reflect Russia’s and Ukraine’s key roles in energy and agricultural markets. On average, 77% of consumers think that the conflict will lead to an increase in fuel prices and 62% that heating and electricity costs will increase.

In almost every market, increased prices of petrol, heating/electricity and food are the main concerns. Although most markets share these three key concerns, there are differences in response rates. Italians and Germans, for example, are more wary of the risk of increased energy costs, reflecting their higher reliance on Russian natural gas.

How consumers will react to a fall in spending power

The obvious targets for spending cuts are discretionary categories such as leisure and fashion. However, the Great Recession showed that when incomes are hit, there are areas of discretionary spend that people will protect, even if that means they have to economise on the essentials.

In many markets, the 2009 recession boosted discounters’ market share, and in 2022, consumers are most likely to say they would switch to a lower-cost retailer to make everyday savings.

Private label was another winner after the 2009 recession, supported by retailers’ efforts to boost the range and quality of own-label offerings.

Many of these recessionary changes in behaviour have become ingrained, but Mintel research shows that the current situation could lead to even further shifts in these sectors. The shifts in behaviour will inevitably play out differently across different markets.

Although inflation will likely be felt in almost every consumer market, how this affects behaviour will inevitably play out differently around the globe. In the markets covered by our research, Polish consumers are the most exposed to the direct consequences of the conflict in Ukraine and are the most concerned about the impact on their finances. Half of Polish consumers would switch to a lower-cost retailer if they had to make savings.

What’s next

As the Russia-Ukraine conflict enters its second month, Mintel will continue to monitor the economic upheaval, the impact on inflation and supply chains, and the different ways in which this is affecting consumer spending patterns across the globe.

If you’re a Mintel client interested to learn more, log in now or speak to your Account Manager. If you’re not a Mintel client, but interested in speaking with an Analyst about the implications of the conflict in Ukraine on your business, please get in touch

Toby Clark
Toby Clark

Toby Clark is Director of EMEA Research, and is responsible for many Mintel report series, tracking consumer sentiment and top-level spending intentions in the UK.

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