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While some countries will see a decline in housing-related spending in 2023, the UAE and Saudi Arabia is expected to buck the trend on the back of lower unemployment rate.
MasterCard Economics Institute also said that businesses with an omnichannel presence, or those providing both online and brick-and-mortar services, are more likely to withstand shocks by meeting customer expectations of where they want to shop next year. Businesses that employ the strategy are already seeing a 6% lift in retail sales in 2022.
In its Economic Outlook for 2023, MasterCard said that globally, it expects higher interest rates to squeeze the cost of living after years of housing boom.
In major developed countries, the report anticipates housing-related spending as a share of goods to fall an estimated 4.5% over the course of 2023, below pre-pandemic levels.
However, that may not be the case in Saudi Arabia, where housing-related spend remained at the same level (10.9%) in 2022 as in 2019, while in the UAE, the corresponding figure is 5.9%.
The MasterCard data also showed that as of September 2022, consumers in the UAE increased their grocery shopping trips by 28% compared to September 2019, but they spent 21.4% less per visit.
Restaurant spending frequency in the country was nearly 30% higher in September 2022 than in September 2019, while the average ticket size was nearly 20% lower, which MasterCard put down to higher-income customers reining in excess.
MasterCard said that from 2019 to 2022, discretionary household spending within the high-income segment grew nearly twice as fast as in the lower-income segment, but much of this gap will diminish with the normalisation in inflation as 2023 progresses.
The institute expects inflationary pressure to ease in 2023, with the average inflation rate of developed economies falling from 7.1% year-on-year in the fourth quarter of 2022 to 3.1% in the same period next year.
Regarding the omnichannel presence, MasterCard said small and large restaurants were saved from losing an additional 31% of sales during the height of lockdowns due to their flexibility, continuing services online while customers could not leave their homes during lockdowns.
Similarly, small omnichannel clothing stores outperformed online-only and brick-and-mortar-only firms, growing 10% and 26% faster, respectively, MasterCard said.
(Reporting by Imogen Lillywhite; editing by Cleofe Maceda)
