The CEO of Ingka Group, the parent company of IKEA, Jasper Brodin, recently stated that although current inflation is gradually cooling down and interest rates are decreasing, there has been a significant shift in consumer behavior since the outbreak of the COVID-19 pandemic, with consumers continuously cutting expenses.
The US economy currently has stable consumer confidence, and there are even signs of a slight increase in the labor market, leading some to believe that the economy is heading towards a “soft landing.” However, Jasper Brodin, the CEO of Ingka Group, a multinational home furnishings retail giant, stated that compared to the significant increase in prices of goods due to supply chain disruptions during the pandemic, IKEA had already spent 2 billion euros last year to reduce prices on its most popular products.
Despite the discounted pricing and increased sales volume, according to the Financial Times, IKEA’s revenue actually decreased by 5.3% to 45 billion euros in the year ending in August, marking its first decline since 2020.
Brodin explained that due to previous high inflation rates and high interest rates, people’s wallets were under pressure, and with the recovery of the supply chain and the decrease in transportation costs and raw material prices, they had to reduce prices on their products, even to pre-pandemic levels.
It is worth noting that Brodin also stated that the current consumer behavior has started to change. Despite the easing of inflation and interest rate cuts in Europe and the United States, consumers are still feeling the pinch in their wallets and have started to cut expenses. For example, they are now primarily shopping based on needs and are no longer obsessed with various DIY products.
Based on their observations, IKEA believes that the current economy is not prosperous and resembles the days after the 2008 economic recession. Even with decreasing interest rates and easing inflation, it will take some time for people to open their wallets again.
In order to meet consumer demand, IKEA has recently launched a second-hand home furnishings trading platform, allowing consumers to buy and sell their used furniture on the platform, seemingly as a response to the lack of consumer spending power.
Whether the soft landing can be achieved depends on three key factors that experts believe should be closely monitored: consumer confidence performance, China’s economic performance, and the economic policy adjustments since Trump took office. Although there is no definitive conclusion yet, since Trump’s election, the market has significantly lowered the potential interest rate cuts by the Federal Reserve at the end of next year. Whether the US can avoid an economic recession crisis remains to be further verified.
Related reports: Trump 2.0 policies may reignite inflation! Krugman warns: Trade wars and repatriation of migrant workers are detrimental to the US economy. Minister of Economic Affairs: Yungpao Energy’s “investment by NVIDIA” false news is manipulating the stock market by saying a lot of inappropriate things. When will the largest bubble in US stock history burst? Analysts: Not afraid of economic recession, the real fatal factor is the interest rate difference between Japan and the US.