How the Economy Will Impact Consumer Goods Companies in 2023

The Consumer Products and Services industry is highly susceptible to negative influences when the global economic climate is unfavorable.

In 2023, the predictions for the global economy are a combination of both positive and negative news, making it a mixed bag for Consumer Products and Services (CPS) companies.

The Impact of GDP

This year, real GDP growth is forecast to fall to 2.9%. This slowdown is predicted to have a considerable effect on advanced economies, which are forecast to expand by just 1.2% in real terms in 2023. However, with growth predictions of 4%, emerging and developing economies provide a ray of optimism.

If your CPS business operates in an advanced economy, it’s time to take a critical look at where costs can be cut, processes can be made more efficient, innovation and R&D can be used to renew interest in your products and services, and how to make use of that information in the most financially responsible way possible. However, if you are in a developing economy, you have more leeway to take risks as it is likely that developing economies will be less severely impacted by the recession should it hit. This year is also an excellent time for CPS businesses in developing countries to start thinking about exporting their goods since recessions generally lower export costs.

But it is important to note that developing economies will not have it entirely easy either. If your CPS business operates in a developing economy in the tourism industry, a recession is likely to cause a considerable decrease in international tourism to your country, which could ultimately affect your bottom line.

The Impact of Commodity Prices

The global economic slowdown, high interest rates, and elevated inflation have led to weaker demand for major energy, metal, and agricultural commodities. This is expected to cause a downward trend in commodity prices. However, this is not the entire story, as commodity prices are not expected to plummet entirely, but simply to reach lower levels than in 2022. It is important to note that lower commodity prices may be indicative of the recession that financial institutions have warned about.

Past global recessions have resulted in weak demand and supply disruptions that led to lower commodity prices. As a result, businesses in the CPS sector should take note of this commodity price outlook. Wholesale costs are expected to decrease, exports are expected to become cheaper, and utilities such as gas are also expected to decrease in price. Thus, operations may prove cheaper for CPS businesses, but the ultimate payoff will depend on what happens to the global economy over the next couple of months.

The Impact of Global Supply Chains

There is good news on the horizon: global supply chains are predicted to improve in 2023 due to several factors, including improved production capacity, restored inventory levels, increased transportation capacity, and weaker demand growth resulting from a slower economic performance. As a result, demand and supply should rebalance and supply chain issues should ease. However, this positive outlook is dependent on the rest of the year proceeding as planned. Any further geopolitical risks or COVID-19 outbreaks requiring lockdowns could once again disrupt global supply chains. Thankfully, the likelihood of either occurrence is small. What does this mean for CPS businesses? In short, importing and exporting goods will become easier, and sourcing suppliers should be less challenging.

The Impact of Consumer Spending

Due to inflation and the predicted recession, consumers in advanced economies such as North America and Europe are likely to spend less. This presents a challenge for CPS businesses as they may struggle to attract new customers and persuade existing ones to continue spending. In contrast, urban areas in Asia, the Middle East, and Africa are predicted to experience resilient growth in consumer spending. As a result, CPS businesses operating in emerging economies may have the opportunity to expand in 2023, even as other regions face economic challenges. Investing profits from this expansion into globalization plans can be beneficial in the long term, as it positions companies to take advantage of the recovery of advanced economies in the future.

The Impact of Labor

Hiring is slowing down globally due to economic uncertainty, which means that employers now have more power. The trend of the “Great Resignation” appears to have abated, and economic slowdowns are likely to bring an end to most labor shortages by increasing unemployment rates.

The situation looks more dire for some regions and industries as skilled laborers migrate due to socio-political or economic pressures. Additionally, an aging workforce is creating gaps in skilled labor in some sectors. As a result, certain worker classes’ labor costs will remain stable or may even continue to rise.

What does this mean for CPS companies? They can now hire talented individuals they could not previously afford. On the other hand, certain sectors, like software development, continue to face labor shortages and high wages. Therefore, companies need to focus on retaining and attracting top employees, irrespective of external job market fluctuations.

How to Prepare Your Consumer Products and Services Business for a Potentially Challenging 2023

The outlook for 2023 is uncertain and dependent on several factors. While the year may see a decrease in labor shortages, lower commodity prices, and stable supply chains, it could also see reduced consumer spending due to a possible recession and slow GDP growth.

However, businesses can prepare themselves for any eventuality through strong, versatile, and competent leadership. It is not an easy task to find and develop executive leadership capable of tackling inflation, recession, and supply chain challenges, but Stanton Chase has over three decades of experience in doing so.

“Businesses can prepare themselves for any eventuality through strong, versatile, and competent leadership.”

If you want to assess the readiness of your leadership team or appoint new executives to navigate 2023’s challenges, you can reach out to one of their consultants by clicking here.

About the Author

Milos Tucakovic is a Managing Partner at Stanton Chase Belgrade. He is also Stanton Chase’s Consumer Products and Services Global Practice Leader.

Milos has almost two decades of executive search and leadership advisory experience, and prior to this accumulated nearly 30 years of human resources and management experience.
Milos is a member of the Serbian Association of Managers and Knowledge Committee of Serbia. He also lectures on management at the College of Hotel Management in Belgrade.