The International Top 30

August is a time for travel. The world has opened up, but inflation is up, too. And that could make for a bumpy road ahead.

Marketers like Unilever, Shiseido and Henkel posted great results last year, but they’ve had to contend with soaring raw material costs, as noted in The International Top 30, our annual look at the largest companies in our industry with headquarters outside the US.

Thus far, consumers haven’t balked at higher prices for cosmetics and home cleaning supplies. But how long will it be before eroding consumer purchasing power impacts sales of commodities like detergents and luxuries like fine fragrance?

In June, the US Consumer Price Index jumped 9.1%, surging to a new 40-year high (up from 8.6% in May) and exceeding forecasts. Analysts had been expecting June’s reading to show an 8.8% increase. On a monthly basis, the broadest measure of inflation rose at a pace of 1.3%, inching up from 1% in May and climbing at a faster tempo than the 1.1% climb economists had projected. It was the largest monthly increase since 2005.

Conditions are worse in other parts of the world. According to a Pew Research Center analysis of data from 44 advanced economies, nearly all of them report consumer prices have risen substantially since pre-pandemic times. In 37 of these 44 nations, the average annual inflation rate in the first quarter of this year was at least twice what it was in the first quarter of 2020, as covid-19 spread. In 16 countries, first-quarter inflation was more than four times the level of two years prior.

While inflation in Japan still looks subdued compared to the US or Europe, prices are rising at a pace that may impact consumption. According to Bloomberg, the latest household spending data already shows consumers starting to cut back on expenditures.

“As companies raise prices for consumers and in an inflationary environment where real wages in Japan are going down and household budgets will come even further under pressure for quite some time to come,” explained Amir Anvarzadeh a strategist at Asymmetric Advisors Pte Ltd.

It may get worse before it gets better. Last month, the US yield curve inverted when yields on two-year notes rose above 10-year notes rates. Since 1955, every time the yield curve inverts, the US economy has fallen into recession. And as long-time observers know, when the US economy sneezes, the rest of the world catches a cold—or covid. China lifted covid-related lockdowns in April. But a spike in cases last month in Shanghai had wary consumers stockpiling products. In fact, Lanzhou, a city of more than four million, went into lockdown on July 12.

In these uncertain times, the only certainty is that consumers will continue purchasing household cleaners, personal care products and cosmetics. Maybe not at the rate we’re accustomed, but the consumer staples and trusted brands that make up the International Top 30 have always navigated rough roads.