Inflation Impact Study

Your 1 crore today will be equivalent to just 35 lakhs in 10 years. Imagine having ₹1 crore today. How would you safeguard its value over the next decade? Let's explore how ₹1 crore performs across different investment strategies while considering the real impact of inflation. As per the Consumer Price Index (CPI), India's inflation rate is around 6-7%. But when we factor in lifestyle inflation, this figure jumps to 10-12%. Let's use the adjusted inflation rate to determine the real value of ₹1 crore after 10 years. The adjusted inflation rate is the actual return on an investment after accounting for inflation. 1️⃣ Held as Cash Current: ₹1 crore Inflation rate: 10% Returns: 0% Adjusted Inflation: -10% Future value: ₹34,86,784 (~ ₹35 lakhs) 2️⃣ In a Bank Account Current: ₹1 crore Inflation rate: 10% Returns: 3% Adjusted Inflation: -6.3% Future value: ₹52,16,700 (~ ₹52 lakhs) 3️⃣ Invested in Gold Current: ₹1 crore Inflation rate: 10% Returns: 8.8% Adjusted Inflation: -1% Future value: ₹90,43,820 (~ ₹90 lakhs) 4️⃣ Invested in Index Funds Current: ₹1 crore Inflation rate: 10% Returns (Sensex): 12.8% Adjusted Inflation: +2.5% Future value: ₹1,28,00,845 (~ ₹1.28 crore) These numbers speak for themselves. Keeping your money idle or in low-yield investments can significantly erode its value over time. On the other hand, investing in growth assets like equity not only preserves your wealth but potentially grows it, even after accounting for inflation. This is why I always emphasize the importance of smart and long-term investing. Knowing this calculation, where would you prefer to invest your money now? hashtag #money #investment #personalfinance #stockmarket

Two major disruptions We have two major disruptive trends underway: 1. Measures of economic policy uncertainty, notably trade policy, have spiked. 2. Consumer sentiment measures reveal a surge in inflation expectations. Why do we care and what could they mean for the overall economy? First, let’s look at uncertainty. Heightened levels of uncertainty make us anxious. It is a basic human instinct to pull in or freeze when you do not know what is next; it is paralyzing. Economic research reveals that reticence. Firms and households tend to delay big investment and spending decisions. Banks are more cautious in their lending decisions, which amplifies the chilling effect on the overall economic activity. The pandemic represented an extreme case of uncertainty, until now. Global policy uncertainty measures spiked above the peak we saw during the pandemic. However, the fear of contagion - its own form of uncertainty - prompted firms and households to avoid or cancel high density forums and places of contagion. Employment plummeted by 1.4 million jobs between February 15, 2020 and March 14, 2020. The largest losers were leisure and hospitality and dental offices. That is prior to one country going into lockdown. Now, let’s turn to inflation. Recent consumer sentiment readings show a sharp spike in inflation expectations since December. That suggests that inflation expectations are not as well-anchored post-pandemic as they were pre-pandemic. We had a hard time getting up to the Fed’s 2% target in the 2010s; now we cannot seem to get down to it. We now know what a blistering bout of inflation is like and are faster to expect prices to increase in the face of a shock than in the past. That muscle memory is a dangerous and self-fulling prophecy for inflation. It both enables firms to raise prices with less pushback by consumers and can trigger hoarding. The scramble to buy eggs in the wake of price hikes due to the bird flu is a good example. Eggs are the largest source of inexpensive protein for households. Their surge in price has prompted a run on grocery stores and rationing by some major chains. That pushes prices up even faster and prompts rationing. It is reminiscent of what we saw toilet paper and hand sanitizer as the quarantines took hold. If sustained, the two disruptions together could be consequential. The worst case scenarios get us to stagflation. That is when inflation and unemployment rises in tandem. We have not seen a serious bout of that since former Federal Reserve Chairman Paul Volcker broke the back of inflation with two brutal recessions in the early 1980s. It would be optimal to avoid a repeat of that outcome today. Understatement.

Inflation has been easing and is nearly back to normal. Yet, Americans’ perceptions of inflation have not really shifted. There’s a lingering view that prices are still out of control. Why is this? Well, first, inflation is cumulative. Even if prices today are rising moderately, they come off very strong increases. In that context, lower inflation means little. Take chicken as an example. So far this year, chicken prices in grocery stores are up by about 0.9% on an annual basis. Not too bad! But that 0.9% increase follows a 28.9% increase from 2019 to 2023. So, the cumulative increase is more like 29.5%. This brings us onto the second point of consumer psychology. Most people, in their heads, hold at least a vague sense of what things should cost. This, as the New York Times recently explained (link to article in comments), is known as the reference price. Today there is a humungous gap between reference prices and actual prices. Most consumers are still living in the price world of 2018 or 2019. That’s not really surprising as pre-pandemic, inflation was incredibly stable and created an embedded sense of what things should cost. Over the summer we asked consumers on our panel what they thought things should cost across various categories and compared it to actual average costs. In grocery, people think prices should be 28.5% lower than they are. In household care products, the gap is 25.3%. The gap is largest in essential products. There's higher inflation here to start. But because these are more frequent purchases people notice price changes and have a better understanding of what prices used to be. They’re also, very often, necessity buys rather than enjoyable discretionary purchases, so there’s likely more resentment of higher prices. Interestingly, in gasoline, perceptions of what prices should be run lower than the actual inflation rate. This is likely because gas prices have always jumped around, so reference prices are all over the place. The key thing here is that there is a divorce between actual data and how people feel. It is taking some time for people to psychologically adjust to inflation. #retail #retailnews #inflation #prices #economy #consumers

Inflation-weary consumers are facing some new headwinds with word that companies are starting the year by passing through new price increases. The Wall Street Journal reports that after a period of holding the line and leaning on discounts late last year, many businesses are raising prices again, pointing to higher tariffs, labor costs, and health-insurance premiums as major drivers. This “real world” inflation doesn’t show up all at once in a single CPI print as we saw last week. But the risk is that it keeps pressure on the everyday cost of living over time. What does it mean for consumers? Even as inflation has cooled from its peak, affordability challenges are not going away. Price levels are broadly high and going higher, with the CPI up 26% from January 2020. New price hikes on clothing, appliances, and household goods can make it feel like the finish line keeps moving. In other words, disinflation is welcome, but it doesn’t automatically translate into relief when the items you buy and replace in normal life start climbing again. For the Federal Reserve, this is exactly the kind of backdrop that supports staying put with its benchmark short-term rate. The Fed can tolerate some “one-time” price adjustments, but policymakers worry about what comes next: higher input costs leading to broader price increases, then feeding into wage demands and service-sector inflation. That is how inflation becomes sticky. If companies regain pricing power, it makes the Fed less likely to cut rates quickly, because the risk is that inflation stops cooling and settles in above target. This is also why affordability is likely to remain front and center in the public conversation this year. Look for the president to try to address it in next week’s State of the Union. Ahead of this year’s mid-term elections, as voters talk about the economy, they don’t talk about the CPI. Instead, they mention whether the costs of groceries, housing, insurance, and basic household items are or are not manageable. And if businesses are raising prices again, that affordability pressure becomes harder for elected officials to ignore. Bottom line: inflation progress has been real; price levels generally continue to rise. The next phase may be choppier. Consumers should plan for a world where prices rise more slowly than they did in 2021–2022, but where affordability still feels tight, and rate cuts, if they come, are more likely to be gradual than rapid. Our advice for individuals and households is to prioritize paying down high-cost debt, focus on boosting income where possible, and to prioritize saving for emergencies while utilizing high yield savings accounts.

Wages and benefits are up, inflation and interest rates are down, and real incomes have been rising in the UK for almost 18 months now... But consumers aren't spending, and PwC UK's latest survey finds the *biggest quarterly decline* in consumer sentiment in over 2 years. Is the UK in a "#vibecession" like our US brethren seem to be? Some of my thoughts below, or read the full report: https://pwc.to/48mI0rA First of all, why does it matter? I've been running PwC UK's consumer sentiment survey since 2008, and the main index number has historically been a reliable predictor of actual household spending 6-12 months later (with an R-squared of +0.7 for you statisticians!). Sentiment has been recovering steadily since a low in Sep 2022... until now. In fact, as with previous changes of government, July's survey, taken directly after the General Election, saw #consumersentiment climb to its strongest level in 3 years. However, our latest September survey (https://pwc.to/48mI0rA) shows the biggest quarterly decline since the start of the Ukraine War, worse than after the Truss mini-budget of 2022. The new government's honeymoon is most definitely over in the eyes of consumers. The biggest decline in sentiment in the last quarter was amongst over 65s. For the first time in over 8 years, #pensioners are now the most pessimistic demographic group, reversing over a decade of improving sentiment amongst older people. The end of the universal Winter Fuel Allowance has had a *direct impact* on the sentiment of retirees. Meanwhile, the sentiment of under 35s actually rose - slightly - but no more than it normally does every September. Weak sentiment has been reflected in #consumerspending. According to the BRC, quarterly non-food retail sales have been in decline every month for over a year now. As MPC member Megan Greene pointed out in her Financial Times column earlier this week (https://lnkd.in/dUQA_3HF), UK consumption is just 1.5% above pre-pandemic levels vs 13% in the US. UK consumers are saving, but not spending. This fall in sentiment and continued aversion to spending is bad news for #retail and #hospitality as we enter their Golden Quarter. Christmas spending propensity amongst consumers has fallen since the summer, and is now no better than it was last year - 27% of us think we'll spend less this Christmas, compared with only 18% saying they'll spend more. Will the improving macro environment and more certainty after the Budget be enough to turn the tide? Whatever the Chancellor unveils next week, consumer sentiment looks to have peaked, and is now falling again. For retail and leisure operators, that means the critical run-up to #Christmas hangs in the balance. Where will the brighter spots of higher spending be? Read our prognosis in PwC UK's latest consumer sentiment report here: https://pwc.to/48mI0rA

Retail sales rose by 3.5% YoY in June (value, non-seasonally adjusted). While headline sales figures for June suggest modest momentum on the surface, much of the uplift was seasonal and driven by heavy promotional activity around events, sport and warmer weather. Beyond that, demand remains selective. Food inflation is hitting households harder, leading to tighter budgets and renewed uncertainty around the cost of living. Living costs remain the dominant concern for households, with food inflation up for a third month in a row in June to the highest level since February 2024. Food prices are particularly visible to shoppers, acting as a psychological anchor on confidence, hitting retail hard. Consumers continue to reframe their priorities, with discretionary spending leaning toward experiences and categories where value can be clearly demonstrated. The encouraging bright spot continues to come from electricals, boosted by June’s record temperatures and post-pandemic tech upgrades. Retailers are walking a fine line. They are working to attract demand without sacrificing margins, all while contending with new structural cost pressures following the Budget. Retailers face a £6.5bn surge in operating costs this year, driven by increases in employment costs, business rates and utilities according to our Retail Economics research with Barclays Corporate Banking. It’s a summer of cautious opportunity. Any resurgence in non-essential retail spending is likely to remain patchy, unless there’s a meaningful improvement in discretionary incomes and consumer confidence. Pleasure to share thoughts on retail sales with the Financial Times’ Valentina Romei (linked in comments below), the Daily Express’s Katie Elliott, City AM's Maisie Grice and others. ____________________________________ ⤴ Follow me for weekly retail, consumer and economic insights. ____________________________________

The Labor Market Is Carrying Consumer Confidence — But for How Long? Consumer confidence edged higher in April, coming in above expectations as the labor market provided a critical buffer against deteriorating economic conditions. The improvement was driven by the Present Situation Index, where assessments of current employment conditions remained firm. In a period defined by geopolitical risk and an energy price shock, the fact that consumers still view the labor market as solid is doing meaningful work in holding sentiment together. That said, we think the headline overstates the underlying health of the consumer. Inflation expectations remain elevated and, in our view, are likely to climb further as the passthrough from higher oil prices, tariffs and supply disruptions continues to work through the economy. The confidence data as currently constituted do not fully reflect the price pressures that are building in the pipeline — particularly across food, energy and shelter — and that will weigh on real purchasing power over the next two to three quarters. Put differently, the survey captures how consumers feel today. It does not capture what they are about to experience. And the gap between current sentiment and the incoming inflation impulse is wider than the topline number would suggest. The labor market remains the load-bearing wall of this expansion. The question facing policymakers and business leaders alike is whether employment conditions can hold long enough to absorb the cumulative drag of rising prices before it begins to show up in spending behavior.

Consumer Sentiment Collapses as Inflation Expectations Surge The U.S. consumer is growing more pessimistic, and today’s data makes that clear. The University of Michigan’s Consumer Sentiment Index fell sharply to 64.7 in February, a 9.8% decline from January and a 15.9% drop from a year ago. Every major component of the index worsened, with consumers reporting weaker confidence in both current conditions and future expectations. The deterioration was widespread across income and age groups, signaling a broad-based decline in optimism about the economy. The timing of this drop is significant. Consumer sentiment had been improving in recent months, and businesses were hoping that momentum would continue into 2025. Instead, today’s report shows a steep reversal, with concerns about personal finances, economic conditions, and inflation weighing on households. One of the biggest drivers of this decline was a 19% plunge in buying conditions for durable goods, largely due to fears that tariffs will drive up prices. Consumers are already adjusting their behavior in anticipation of higher costs, a trend that could have ripple effects across industries. At the same time, inflation expectations are rising at an alarming rate. The one-year inflation expectation jumped from 3.3% to 4.3%, the highest since November 2023. The five-year outlook rose from 3.2% to 3.5%, marking the largest month-over-month increase since 2021. These shifts matter because inflation expectations influence real economic decisions. If consumers believe prices will continue rising, they may change their spending habits, demand higher wages, or delay major purchases. This, in turn, can complicate the Federal Reserve’s path forward on interest rates, as the central bank has been looking for stable inflation expectations before considering rate cuts. Today’s report also aligns with the other economic data we’ve seen this morning, reinforcing a broader theme of economic uncertainty. The services sector contracted for the first time in over two years, existing home sales fell sharply, and now consumer sentiment has cratered. The combination of these factors suggests that momentum in the economy may be shifting. If consumer confidence continues to deteriorate, spending could slow, business investment could weaken, and economic growth could stall. At Havas Edge, we track these shifts closely because consumer confidence is one of the most important leading indicators of economic behavior. When sentiment turns, spending patterns follow. Understanding these changes early allows businesses to adapt, ensuring that strategies remain relevant in an evolving market. #ConsumerSentiment #Inflation #Economy #FederalReserve #ConsumerBehavior

Consumer confidence is not a soft metric. It is a canary in the coal mine. The University of Michigan's preliminary April consumer sentiment reading fell to 47.6, down from 53.3 in March and below analyst expectations. If that number holds, it is the lowest reading in the survey's 70-plus-year history. The previous low was 50, recorded in June 2022, when inflation was crushing American households. What matters here is not just the number. It is the mechanism. Consumers do not wait for economists to certify a downturn. They feel risk firsr, and then they act on what they feel. Year-ahead #inflation expectations jumped from 3.8% to 4.8% in a single month, the largest surge since April 2025. That is not a prediction. It is a behavior change already in progress. #Consumers who expect higher prices start spending differently today. Notably, 98% of interviews were conducted before the April 7th cease-fire announcement. The final reading may improve. But even that possibility reinforces the broader point: consumer psychology is now exquisitely reactive to geopolitics. A conflict thousands of miles away can reshape Main Street demand almost overnight. For business leaders, this is the lesson: demand is no longer shaped only by prices, wages, and employment. It is shaped by perceived stability. And confidence, once lost, does not return on a schedule. In #retail, especially, that matters. Consumers may keep spending for a while, but they change how they spend long before they stop. They trade down. They delay. They tighten what feels necessary. The wallet closes in stages, not all at once. I help lead marketing and brand strategy across 25+ brands and tens of thousands of points-of-sale. What I'm watching right now is not whether consumers will stop buying, it's the early shift in what they value most and what they're willing to pay full price for. That shift is already underway, and it will hit discretionary categories first. The signal is in the sentiment data. The question is whether we're reading it early enough to adjust. The market loves hard #data. But #sentiment is often where the future first clears its throat. The Wall Street Journal #marketing #brands #shopping #ConsumerBehavior

As we head into the Autumn, October’s Consumer Sentiment Snapshot finds that the difference in spending intentions between wealthier and poorer households continues to widen. The findings reinforce that consumer spending continues to weigh on the UK economy, shaped by a series of cyclical and structural trends. Despite expectations of a consumer recovery, a number of factors are continuing to put downward pressure on real consumer spending. The first is inflation. Even though inflation has decreased, consumers continue to feel the sustained pressure from the high cost of essentials. The public continue to save more than they did pre-Covid and when they do spend, they are slightly more willing to spend on discretionary services over goods.   🟩 Essentials are up, discretionaries are down: Essentials spending continues to rise, especially for utilities and food – with a quarter of respondents expecting to spend more on food this month. On the flip side, discretionary spending (dining, leisure) intentions are falling among lower-income households, though travel spending plans remain stable. 🟩 Those expecting to spend more on utilities increased for the fourth consecutive month: 25% of respondents expect to spend more on energy and water this month – the strongest rise since April. Only 18% of respondents attribute this increase to seasonal effects, while over 50% cite rising prices as the main cause. 🟩 What’s driving higher spending intentions differs by income group: Lower-income households are 8pp more likely to cite rising prices as the reason for expecting to spend more on food, while wealthier households are 8pp more likely to attribute it to higher incomes and 3pp more likely to cite holidays or special events. Overall, the sentiment remains cautious, while consumers continue to prioritise essentials, many remain wary of spending freely amid economic uncertainty. Stepping back, ahead of next month’s Autumn Statement, there are two important things the Chancellor should keep in mind when it comes to consumer sentiment: 1️⃣ Consumer spending remains weak and particularly susceptible to inflation impacts. This means the Chancellor must be particularly cautious about avoiding any tax or spending rises which might lead to higher inflation, as this could further weaken consumer sentiment. 2️⃣ Tax rises – such as VAT adjustments – which rely on consumer spending may well not prove to be particularly effective revenue raisers and may well react in unpredictable ways given the unusually weak consumer picture (and broader slow growth in the private sector). 🔗 Read the full findings here: https://lnkd.in/e268RH9S