With the beginning of the new decade getting off to a rocky start, things appeared to be on the up again. However, this has been quickly halted by the steepest rise in inflation that we’ve seen in forty years.
This has in turn caused a cost-of-living crisis meaning that many households are struggling to keep up. The cost-of-living crisis isn’t just an issue in particular countries, the impact is being felt on a global scale.
It has had an adverse effect on not just people, but across industries as well. We’ll be taking a look at just how the cost-of-living crisis has had a knock-on effect on certain industries. But first, what is the difference between inflation and cost of living?
Difference between cost of living and inflation
- Inflation
Inflation is an all-encompassing term that impacts the financial markets as a whole. This tends to include things such as labour and wages meaning that technically, wages should rise within the parameters of inflation. However, this is not always the case as most companies are the deciders when it comes to rising wages.
- Cost of living
Cost of living is different to inflation. This is where labour and therefore the income a household has, is not rising in line with inflation. This means that although necessities such as shelter, water, gas and electricity and food are rising, wages are not.
Cost of living means that although the prices in everything we need in order to live are rising, our wages are not rising with them. Therefore, we end up with less money to pay for even the minimum we need in order to survive.
How the rise in cost of living is impacting businesses
- Swapping out branded items
One easy way to start cutting down on household bills is to switch from typically more expensive branded products to the own brand versions we see in supermarkets. Items such cleaning products are seeing a downturn in sales as people opt for the cheaper own brand versions of these items.
Other food items such as pasta or bread are also an easy switch for people to make. These items are on most weekly shopping lists so making the swap to own brand can make a difference. The only issue here is for the brands themselves as it is difficult for them to price down their items to these competitive prices.
- Budgeting entertainment
One of the first things to go when people are trying harder to budget is entertainment. It’s the one sector that is easier to cut down on because it’s seen as a treat rather than something that is necessary.
When budget, people tend to look at what money they need to pay for necessities such as rent, bills and food. If there is not a lot left over, they’re more likely to save this money or budget to spend on their favourite hobbies.
For those who enjoy playing casino games will look for the best promotions and bonuses on offer at casino sites so they are not depositing much of their own money but can still play the games they enjoy for the fraction of the cost. Those who enjoy eating out, may decide to find a recipe and have a date night in cooking. For those who enjoy going out for drinks with friends could host a cocktail making night at their own home, all ways to save and budget their hobbies.
In response to this issue, many entertainment sectors have seen a decline in sales. This is sure to continue into next year as people feel the crunch after Christmas.
Eating out is a luxury that many simply cannot afford during this current crisis meaning that a lot of restaurants have had to close. It’s one of the few ways that people can cut their outgoings, but it means that restaurants and their staff lose out too.
- Reducing the amount of new clothing
There were many reports that clothing sales and other household items have reduced even more than they were during the pandemic. These numbers have fallen for three months in a row and are showing no signs of stopping.
People are now less likely to be making purchases that they don’t consider to be necessary. Clothing is one of the first to see a cut as a lot of the time, these purchases are more of a frivolity or treat than a necessity. People who are struggling to pay bills are not going to be making purchases of clothes online or in store.
This is having an adverse effect on clothing retailers as they are seeing a drastic decline in sales. Despite the festive period being in full swing, they are unlikely to see a swift recovery any time soon.
- Postponing purchases of more expensive items
Similarly, to the reduced clothing sales, people are buying less big ticket household items. Bigger and more expensive purchases such as technological equipment, cars and household items such as washing machines aren’t selling as the costs are too high for those trying to budget.
Even if they need of these items because their current appliances are worn or in need of replacement, cashing out on these expensive items has to sit on the backburner. This is impacting these industries on a global scale as the effects are being felt all across the world.
January is usually a big time for sales for these higher end items but given the disappointing outcome of Black Friday this year, it doesn’t look as if it will help encourage shoppers to go out and buy.
The cost-of-living crisis is impacting everyone on a global scale. This negative impact is being felt across industries and different sectors. We can only hope that 2023 sees an improvement across the globe.
