Shopping is going to be a lot more painful in 2022

When the world closed in 2020, we bought everything we needed to live in the house: pelotons, pets, sweatpants and sourdough starter. In 2021, our shopping reopened: We reapplied lipstick, whitened our teeth, and swapped loungewear for chinos and dresses. Most of the consumer, retail and luxury groups had a good year.

But the consumer sector is now facing another change in habits, and it may not be as favorable.

The Omicron variant is a headwind for the travel, hospitality and retail sectors. Even if the latest wave of infections peaks relatively soon, there are other dangers ahead – from exhausting lockdown savings as prices continue to rise, tighter monetary policy and higher borrowing costs, some consumers for many years. Haven’t had to bear it.

The cracks are already visible.

Even before the surge in Omicron cases, there were signs of consumers being more cautious. For example, British retailer Curry Plc said demand for its electronics was weaker than expected. And with fewer people visiting the city center and offices, famed London department store Harrods pushed its sales from 26 December (Boxing Day) to 17 December. Other metropolitan areas such as New York City have also suffered.

But it is not just the new variant that is on the minds of buyers. US retail sales in November are lower than forecast. True, some spending may have been extended until October, when many retailers ran special offers and consumers shopped to avoid product shortages. But the real concern is that rising prices have finally started to show their effect.

So far, consumers have been able to cope with sharp inflation on everything from coffee to coffee tables. Many people were swept away with savings after staying at home for more than the last two years. But reopening economies drained that cash.

And now the prices are rising even faster. Most consumer-goods companies are already negotiating price increases with retailers or will begin in January. Commodities from oil to packaging could lead to some difficult negotiations with inflation coming in. It is also likely to accelerate further. US food prices rose 6.1% in November, the highest level in 13 years. We could see similar growth in Europe.

Although wages are rising as well, US inflation is leading by some distance: the difference between the two is the largest in more than 20 years.

Curry’s caution could reflect a reduction in spending already underway in the UK. After all, a new laptop, iPhone or oven is a great purchase. In the US, Lowes Cos said it expects domestic recovery from the pandemic to accelerate.

Many people spent big during the pandemic, especially on new homes. This could be another source of weakness with the rise in interest rates. Higher borrowing costs are expected in 2022, which could push Americans and Europeans to pull in purse strings.

While large, expensive items may feel the pinch at first, other areas will also suffer eventually. When consumers are stressed about their wallets, there is a tendency for consumers to switch from big brands to cheap private label, or from meat to vegetable-based food. Cutting back on increased indulgences during the pandemic, such as ordering takeout, would be another way to save money.

There are some silver linings. While the advent of Omicron is affecting travel and comfort, it may ease some of the consumer pain in the short term. Working from home again means saving money on commuting and lunch outs. Expectations of a “Revenge Christmas” this year – set out for a bleak 2020 holiday – are already looking fragile, as some people cancel their restaurant reservations and plan to hold large gatherings make.

January is always a serious month for retailers, restaurants and bars. This is when credit card bills land and trends like dry January and veganism take hold. But this year it could be even more brutal.

It’s a timely reminder that, like stocks, consumer rotation doesn’t just go one way.