The latest quarterly analysis of FMCG (Fast Moving Consumer Goods) market trends across Europe by SymphonyIRI Group highlights the pressure the increasing price of the shopping basket – reaching as high as 5.1% in the UK during October to December (Q4) 2011 – is having on the purchasing power of shoppers.
The research report shows that during December 2011, the price of the average shopping basket increased by 4.8% compared to December 2010, with food items alone growing by 5.3% for the same period.
Although prices are increasing, shoppers are becoming both frugal and smart, resulting in less food and non-food items being purchased. The price rises caused volume decline in Q4 2011 for non-food items (-1.6%). In 2011, volume declined continuously until the end of the year, when it would have continued to decline, if it was not for the final week of 2011 having one extra shopping day. Therefore, volume sales remained static on food items compared to last year (0.3%).
Economic pressure and an unemployment level rate up from 9.5% in January 2011 to 9.9% in December 2011 across Europe is affecting confidence levels in the UK. This, in turn, is impacting the volume of sales in the UK, resulting in a 0.2% decrease in the second half of 2011 compared to the same period the previous year.
SymphonyIRI Group also expects this to be the result of a high level of price increase (up 4.0%) as well as an increase in VAT and the high level of inflation which is still above the government’s target.
Tim Eales, director of Strategic Insight at SymphonyIRI Group, said: “With prices rising faster than earnings, we are deeply into a consumer recession. Despite recent reports that the Consumer Price Index (CPI), which measures changes in price levels and inflation, went down last month, it is still proportionally high compared to previous years.
“According to the Office for National Statistics (ONS), it’s at 3.6%, but the government target is 2%, so it’s a long way off. The truth is that we may be buying less, but the average cost of a shopping basket is still going up.
“People have to change how they spend and save and even those that are immune because they can afford the extra are caught up in the reaction. A new type of frugal but smart shopper has emerged. They are buying less and buying more wisely, leveraging from the multiple sources of information and multiple channels that exist – including online and mobile – to make savings and find value.”
Source: SymphonyIRI Group