War in Ukraine is driving up European prices—and consumer concern

The news: As war in Ukraine persists, consumer concerns over inflation grow across Europe and the UK. Consumer confidence is at an all-time low, and will take a while for retailers to rebuild in European markets.

More on this: For the past two years, consumers’ shopping behaviors have been characterized by pandemic-related concerns. While confidence had started to increase as concerns over the pandemic declined, Russia’s recent war on Ukraine combined with inflation has reversed that gain.

  • Consumer sentiment dropped significantly in the past month, failing to stabilize after an observed low due to pandemic-related stressors, per GfK.
  • Similar drops in consumer sentiment were last observed during the 1993 recession and the start of the pandemic, showcasing consumers' concerns over access to everyday essentials as a result of Russia’s war on Ukraine.

On the Continent, by country: France, Germany, Italy, and Belgium have experienced massive plummets in consumer confidence as inflation rises. A quarter of German consumers rearranged investment plans in response to economic shifts resulting from the war in Ukraine.

Meanwhile, in the UK: Consumer confidence entered its fourth month of decline, as living costs rise and fuel and food prices reach record levels. Grocery inflation hit its highest level in 10 years, according to Kantar, causing consumers to alter shopping habits.

Discount sees an uptick: The UK’s ​​£12 billion ($16.50 billion) spent on non-essential products and services is expected to drop this year, with the average family left with almost 6.5% less cash after paying for essential items. Unsurprisingly, European discount stores Lidl and Aldi experienced sales spikes, demonstrating consumers’ desire to find lower prices.

  • A third of the public has already reduced their spending on non-essential items, according to BritainThinks.

The big takeaway: Retailers should focus on providing consumers with affordable options to accommodate rising living costs. It’s important to keep in mind that consumers may also conduct additional research in their shopping journeys to compare prices across various online platforms.