Consumers in the US and Europe Will Diverge in 2023
The great inventory glut has yet to be cleared out. Plus, the columnist looks at what she got right — and wrong — in 2022.
Stuffed?
Photographer: JEFF PACHOUD/AFPWhat to expect in 2023:
For the past two years, I’ve been tracking what I like to call the “Great Rotation.” This is the shift away from pandemic purchasing trends to consumption associated with reopening. In 2022, the Great Rotation met the “Great Inflation” — the change in habits as consumers in the US and Europe adapted to higher prices. This collision led to a pile up of unwanted casual clothing and kitchen appliances in US stores and warehouses. American retailers were forced to discount deeply to get rid of the glut, crashing their profit forecasts. As we move into 2023, there are signs the US consumer is through the worst. Inflation appears to have peaked and the inventory surplus has shrunk, although it has not completely dissipated.
In Europe, however, consumers are just starting to feel the pinch from higher energy costs. Moreover, the war in Ukraine feels much closer. As for the UK, despite the dire warnings, nothing has really happened yet. That is about to change. As Brits deal with rising household energy bills, higher food prices, more expensive mortgages and tax hikes they face the most almighty new year hangover.