Cost-of-living crisis: High inflation and impact on the standard of living

Cost-of-living crisis: High inflation and impact on the standard of living

Research by a Ghanaian market research company, SumsureIQ, indicates that the standard living for the average Ghanaian consumer has declined by 8%.

The post COVID pandemic period has seen myriads of economic challenges facing the ordinary consumer across the globe and notably in Ghana where the economic landscape is
characterised by historic high levels of inflation coupled with cost-of-living crisis. Inflation, cost of living and standard of living are interrelated and connected.

Whilst the cost of living is subjective and can be on individual basis, the average cost of living can be measured (e.g. monthly, half-yearly or yearly) for a group of people, especially in the same geographical area.

Ultimately, cost of living is a personal finance concept that measures how much in the local currency an individual or a household living costs are. Inflation on the other hand, is universal and is tied to a specific country.

It measures how the average prices of goods and services changes for everyone with time.

This means that high levels of inflation could lead to costs of living crisis for most consumers, although this is not a direct relationship as inflation affects each individual and group of people differently.

Prices of such vegetables on the market consistently go up

When prices rise for goods and services, high levels of inflation always push up someone’s costs of living. This means that when prices rise for selective or elective spending (like spending on automobiles, washing machines, fridges/freezers, holidays and hobbies), people will often balance their lifestyle choices with cost-cutting actions.

In the end, consumers will always adjust to rising cost of living and hence, reducing their standard of living, if there are no equivalent or simultaneous increases in the purchasing power of their incomes.

In essence, a monthly living wage is a reasonable measure of cost of living. A monthly living wage is the average level of wage required by a person in a country to be able to afford a basic but decent living standard every month.

In Ghana, the average level of living wage in Urban and Peri-Urban areas was estimated to be GHS 2,922 in 2023 by Global Living Wage Coalition (https://www.globallivingwage.org/countries/ghana/).

This was worth about US$ 266 of goods and services in 2023. Economists at SumsureIQ estimate that, the average monthly living wage in the first half of 2024 to be about GHS 3,682.

This equates to an average increase of about 26% on the 2023 level. However, it is now worth US$ 245 of goods and services. Due to the fact that the economy of Ghana is import dependent, this may suggest a decline in the average Ghanaian living standard by about 8% in January to June 2024 compared with the same period in 2023.

Basically, what this means is that, if in the first half of 2023, the average consumer could buy 100 units of consumable goods and services in order to have a reasonable and decent living standard, in the first half of 2024, they could only buy 92 units of such goods and services.

Consumers’ standard of living is mainly due to a combination of the high levels of inflation and the fast depreciating Ghanaian Cedi vis-a-vis the major foreign currencies like the US dollar and compounded by the fact that, the Ghanaian economy is highly import dependant.

Using household consumption expenditure of FMCG per an adult as a measure of living standards

They found, that consumption of FMCG is generally flat with categories like Rice, Edible Oil, Food Seasoning, Ice Cream, Noodles and Pasta declining. This may suggest that Ghanaian consumers are reducing the quantity and volume of food they consume, even though food accounts for an increasing proportion of their FMCG consumption.

On the other hand, the SumsureIQ team, noticed that Ghanaian consumers are increasing the consumption Non-Alcoholic Beverages like Bottled Water, Powdered Beverage and Tea.
However, they are decreasing the consumption of Soft Drink Beverage, Energy Drinks and Fruit Juice.

This may suggest that consumers are substituting expensive categories with less expensive and essential for life categories as part of the adaptation process.

According to the Founder and the CEO of SumsureIQ, Dr Erasmus L Owusu, “even though in Ghana, FMCG accounts for over 50% of the average consumer’s basket of goods and services, household consumption expenditure of FMCG is an excellent indicator or measure of standard of living.

Furthermore, due to high levels of inflation, across board, it is most likely that less quantities will be consumed of other goods and services like Recreation,

Sport, Culture, Clothing and Footwear, Information and Communication Services and Insurance and Financial Services compounding and accelerating the decline in overall standard of living of the average Ghanaians consumer”.

Source: SumsureIQ (www.sumsureiq.com) is a full market research agency and consultancy based in Ghana and we collect over 100,000 lines of data each month on over 70 categories and segments of Fast-Moving Consumer Goods (FMCG) in Food, Non-Food, Alcoholic and Non- Alcoholic Beverages across all the 16 administrative regions and 10 channels/store-types in Ghana.

This amount of data shows that SumsureIQ has the complete view of the FMCG retail market structure, volume of consumer consumption and consumer behaviour in Ghana.

High inflation changing consumer spending — New research

THE high level of inflation in the country is changing consumer spending, according to a report. Authored by SumsureIQ, the report suggested a shift in Fast-Moving Consumer Goods (FMCG) spending and shopping pattern in Ghana, with the outcomes showing that consumers were progressively spending more of their hard-earned income on food and non-alcoholic beverages products which are basic and essential for everyday sustenance than alcoholic beverage and non-food products.

“For example, our retail audit research finds that from January 2024 to March 2024, consumers in Ghana spend about +1% points and +2% points more on food and non-alcoholic beverage respectively compared to January 2023 to March 2023.”

“This may suggest that consumers are relatively increasing their spending on food and beverage items and focusing their disposable income spending on the necessary and life important products potentially due to the impact of high levels of inflation in Ghana,” the report highlighted.

The country has been battling with high inflation since 2022, with the rate reaching a 22 year high of 54.1 per cent in December 2022.

2023, however, saw a decline in inflation, with the rate declining to 23.2 per cent in December 2023.

The rate went up slightly to 23.5 per cent in January 2024 but has since declined again to 23.2 per cent in February.

The report said although this presents some relief to many consumers, the levels are still high in recent historical terms and/or compared to other neighbouring countries.

“Additionally, it means that prices are still increasing on the average albeit, at a slower rate of 23.2% as in February 2024,” it noted.

Adaptation to cost
Experts and Analysts at SumsureIQ are of the view that, this trend reflects the average Ghanaian consumer’s adaptation to cost of living crises caused by high levels of inflation by prioritising basic, essential and life-saving food and beverage products.

Thus, hunting for bargains and value for money in their shopping trips and choices.

“Our research also finds that the main losers in the competition for consumers’ hard-earned incomes in FMCG products are in the non-food and alcoholic beverages.”

“For example, our ongoing retail audit research finds that in January 2024 to March 2024, consumers in Ghana spend about -1% points and -2% points less on liquor/alcoholic beverage and non-food respectively compared to January 2023 to March 2023 as shown in the SumsureIQ’s Brand and Performance Index.

Commenting on the report, the Founder and CEO of SumsureIQ, Dr Erasmus L Owusu, said inflation affected each individual consumer and each group of consumers’ cost of living differently.

He said, however, based on the data, it appeared that on the average, the high levels of inflation was impacting on the spending and shopping patterns of all consumers, hence their standard of living in Ghana.

Data collection
The report collects over 100,000 lines of data each month on over 70 categories and segments of Fast-Moving Consumer Goods (FMCG) in food, non-food, alcoholic and non-alcoholic beverages across all the 16 regions and 10 channels/store-types in the country.

A release by the company said “this amount of data shows that it had the complete view of the retail market structure and consumer behaviour in the country”.

SumsureIQ’s BRAND PERFORMANCE TRACKING INDEX – 6th Issue

The most complete view of the FMCG market and consumer behaviour in Ghana. Consumers in Ghana spent between GHS 120.7 Billions (US$ 8.3 Billions) and

GHS 146.1 Billions (US$ 10.1 Billions) on Fast-Moving Consumer Goods (FMCG) from January to June 2024. Of this amount, Food accounts for 59%,

Non-Alcoholic Beverage, 15%, Alcoholic Beverage, 12% and Non-Food, 14%.

Below are the “MOST” valuable categories in Food, Non-Alcoholic, Alcoholic and Non-Food sectors:

30 Manufacturers/Suppliers accounted for over 75% of all the January to June 2024 FMCG consumer value sales in Ghana. Is your company/brand one of

them? Are your brands in the consumers’ shopping basket in this tough economic landscape? Do you want to know more about your brands and

categories performance and that of your competition?

In this cost of living crises in Ghana, if you want to know more about your brands, manufacturers/suppliers, and Categories performance, reach out to SumsureIQ and see how

we can assist you to move your brands up and into the Consumers basket list. Contact us on WhatsApp or call on 00 233 201 269 824 or 00 233 501 490 170 or email to:

info@sumsureiq.com Or visit our website at www.sumsureiq.com

#MarketResearch hashtag #Sumsureiq hashtag #marketResearchInGhana hashtag #GhanaConsumers hashtag #BrandPerformanceTracker

Dr Erasmus L Owusu, PhD., JOSHUA NARGEH, CA, Bright Alorwoyie, Frank Woode, @Winnifred