Romanians question every expense as 'economy of fear' grips the nation

A significant shift in consumer behavior is underway in Romania, with individuals meticulously scrutinizing every expense before making a purchase. The era of impulsive buying has given way to a more cautious approach, characterized by questions like "Do I really need this?" or "Can I afford this now?"

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The concept of 'economy of fear' captures the current market psychology very precisely. Unfortunately, we are going through a period where the Romanian market is going through a stage marked by extreme caution. The transition from consumption based on impulse and desire to one dictated by necessity and strict utility is already visible in the numbers.

Economic analysts describe this phenomenon as an "economy of fear," reflecting a market psychology dominated by prudence and uncertainty. This transition from consumption driven by impulse and desire to one dictated by strict necessity and utility is evident in market data. Consumers are increasingly prioritizing value, actively seeking out promotions and opting for less expensive products.

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We anticipated this phenomenon when, as early as two years ago, we warned that Romanians would end up going to the supermarket like they go to a museum, admiring the products and not being able to afford them. We said we would end up living under the sign of promotions, of sales by the hundred grams, and reality practically confirms that Romanians have entered, willingly or unwillingly, the race for promotions, a kind of 'Hunger Games' in a Romanian version.

This trend manifests as "trading down," where consumers switch from premium brands to supermarket private labels. While the volume of goods in shopping baskets may remain similar, the overall value and perceived quality have decreased. Furthermore, there is a noticeable contraction in the market for durable goods. Purchases of appliances, furniture, and electronics are increasingly driven by the need to replace defective items rather than by a desire for upgrades, leading to longer replacement cycles.

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We are witnessing, first of all, the effect of 'trading down.' People are giving up premium brands in favor of supermarket private labels. The shopping basket remains similar in volume, but decreases significantly in value and perceived quality.

The economic uncertainty impacts different demographic segments unevenly. Those with the lowest incomes, particularly minimum wage earners, families with children, and pensioners, are the most affected. Their budgets are largely consumed by basic food items and utility bills, leaving little room for discretionary spending and focusing their financial priorities almost exclusively on survival.

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Secondly, we see a contraction of durable goods. Sales of home appliances, furniture, and electronics, such as new generations of smartphones, are recording much longer replacement cycles. Purchases are made primarily to replace a defective product, not for a simple upgrade.