Cities are hubs for spending, with 80% of expenditure expected to be generated by urban areas in 2023. Spending growth in 2023 will, however, be sluggish, as cost of living challenges force consumers to be more conservative in their expenditure. Over the next 3-4 years, inflation is predicted to fall, shifting the balance of spending back towards non-necessities; however, consumers are likely to display more conscious consumption habits, valuing sustainability and quality over quantity.
This report comes in PPT.
Cities are the undisputed leaders when it comes to spending. In 2023, 80% of consumer expenditure globally is expected to be generated by urban areas. Moreover, the average urban consumer is set to spend more than three times more than someone living in a rural area.
In 2023, year-on-year urban consumer expenditure growth is projected to be at its third slowest rate since 2000, due to the ongoing cost of living crisis. Weak spending is expected to have a greater impact on city economies that derive a large share of GDP from consumption.
Urban consumers in 2023 will display conservative spending habits, prioritising necessities and cutting back on discretionary expenditure. Discount stores and private label goods will thrive as people emphasise value and affordability; however, affordable indulgences will remain popular. Consumers are also expected to use digital tools to seek bargains and discounts.
While consumer spending will remain weak in 2023, especially in advanced economies, more robust opportunities are likely to be found in Asian cities, thanks to stronger income growth, a rebounding tourism industry and the reopening of the Chinese economy. Asian cities are also expected to provide stronger growth opportunities in the long term.
Inflation is expected to gradually subside by 2026/2027, which should help reignite consumer spending. Reduced cost of living pressures will boost spending on discretionary goods and services; however, consumers are expected to display more conscious consumption and sustainability-inspired habits that favour quality over quantity.
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