Consumers are already feeling the squeeze from the Middle East conflict, with more cutting back on saving to cover rising costs, RSM UK’s Consumer Outlook shows.

RSM’s survey of 2,000 consumers found that over a fifth (21%) of consumers will save less than usual to help cover rising costs over the next three months, rising from 17% before the Iran war hit. In addition, 6% of consumers will draw down on existing savings to help cover rising costs, up slightly from 5% in February.

The top three areas that consumers plan to spend more money on in the next three months include groceries (up from 18% in February to 24% in March), energy consumption (up from 10% to 15%) and using a car e.g. petrol, which more than doubled from 6% to 13% as consumer feel the 20% jump in fuel prices to 157.62p per litre on 20 April, up from 131.46p per litre in mid-February.

Robyn Duffy, Consumer Markets Senior Analyst at RSM UK: "We’re seeing early signs that consumers are starting to feel the pinch from the Iran conflict, and learnings from the 2022 energy crisis suggest it’s only a matter of time before that feeds through to sentiment. Consumers have already suffered a hit through the surge in fuel prices, plus the jump in inflation in March and expected increases in energy costs, means many are planning to dip into their savings to soften the blow.

“As incomes get squeezed and consumers chip away at their savings to support essential spending, this will likely result in many pulling back on discretionary spending and ‘nice to haves’, hitting consumer-facing businesses the hardest. The unusually high levels of savings could help to smooth the impact of higher costs in the near-term. However, households tend to prioritise rebuilding savings in the aftermath of a shock, so spending may remain subdued for a prolonged period, particularly if we see interest rates go up.”

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