1. Cheap drinks<\/p>\n
There has been a years-long trend in Australia of drinking less, but better quality, alcohol.\u00a0<\/p>\n
That has started to change as consumers search for cheap drinks.<\/p>\n
The ASX-listed alcohol packaging company Orora has detected a global shift toward cheaper spirits since the start of the Iran war. The volume of sales is also less than they had previously forecast due to diminishing customer confidence.<\/p>\n
Steven Fanner, executive director at Spirits & Cocktails Australia, says Australians are \u201ctrading down\u201d due to rising living costs.<\/p>\n
\u201cThey are getting something that\u2019s a little bit cheaper, or opting for lower alcohol content, not necessarily as a responsibility measure, but more because of cost,\u201d Fanner says.<\/p>\n
The consumer trend is making it difficult for businesses that would ordinarily increase their prices to offset rising costs such as freight and fuel.<\/p>\n
\u201cThe question for businesses is how do you contain the price of products for the consumer because they don\u2019t have any more money to spend, even if the cost of producing the product and getting it to market is going up,\u201d Fanner says.<\/p>\n
Similar pressures are being felt by cafes and restaurants grappling with rising costs and financially strained customers, many of whom are cutting back on takeaway coffees and eating out<\/a>.<\/p>\n 2. Healthcare bypass<\/p>\n The ASX was trading near record highs shortly before investors lost confidence that there was a clean exit strategy for the US-Israel war on Iran that could normalise the oil trade.\u00a0<\/p>\n While many stocks have weathered the subsequent bout of market weakness, the Australian headquartered medical device company Cochlear lost more than 40% of its market value in a single trading session on Wednesday.<\/p>\n The company downgraded its profit outlook after global demand for its cochlear implants, designed to help people with hearing loss, weakened amid deteriorating consumer sentiment.<\/p>\n It told shareholders that poor sentiment \u201cappears to be affecting discretionary healthcare decisions\u201d, as more prospective patients are unable to afford treatment, especially in the US.<\/p>\n Analysts at Morningstar said Cochlear was facing long-term headwinds with adults \u201cdeprioritising implants\u201d.<\/p>\n 3. Bedding anxiety<\/p>\n The deterioration in consumer confidence has been rapid, with many households already paying more on their mortgages before rising petrol prices took hold in March.<\/p>\n The closely watched Westpac-Melbourne Institute consumer sentiment index shows anxiety over jobs has reached levels not seen since the pandemic.<\/p>\n Households have responded by forgoing purchases of furniture, bedding and home appliances.<\/p>\n Over the past two months, shares in furniture retailer Nick Scali have fallen about 20%, Harvey Norman is down more than 25% and homeware stockist Adairs has dropped by more than 30%.<\/p>\n Richard Hemming, editor at Under The Radar Report, says retail is \u201cat the forefront of your discretionary dollar\u201d.<\/p>\n \u201cPeople don\u2019t like war, it\u2019s a confidence killer,\u201d Hemming says.<\/p>\n \u201cYou\u2019ve got a lot of headwinds at the moment. The environment is one of consumer constraint, and retail is at the front of that.\u201d<\/p>\n There are some brighter spots in retail, with Scentre Group reporting strong foot traffic at its Westfield centres, suggesting Australians are still enjoying shopping outings.<\/p>\n 4. Consumed by worry<\/p>\n As the Middle East conflict enters its third month, the cost of the oil crisis is starting to ripple across the Australian and global economy, affecting the prices of a surprising array of products.<\/p>\n The world\u2019s top condom producer, Malaysia\u2019s Karex, plans to raise prices by up to 30%<\/a> if supply chain disruptions drag on, while several Australian building suppliers have announced price rises of a similar magnitude for PVC pipes.<\/p>\n Soaring fuel, fertiliser and transport costs will also feed through to higher prices<\/a> in supermarkets.<\/p>\n