Consumers and the Pandemic: ImplicationsSubmitted by Bernhardt Wealth Management on April 27th, 2020
Since at least mid-March, when President Trump declared a national emergency because of the coronavirus pandemic and the associated outbreak of COVID-19, Americans have been in what seems like a completely different world. New phrases have become part of our everyday conversation: “social distancing,” “shelter-in-place,” “essential industries,” and others. Many of us have abruptly transitioned from going to the office each day to working from home via the internet. Zoom, Skype, and other teleconferencing applications have replaced walking down to the conference room or a colleague’s office to discuss work-related issues. For many more, working from home is not possible, and unemployment has skyrocketed as a result.
There have been other changes, as well. Going out for a sit-down meal at a favorite restaurant is, at least for now, a thing of the past. Movie theaters are closed, along with most houses of worship, many of which have transitioned to some form of videoconferencing as a method of allowing congregants some way to continue participating in services. Face masks and latex gloves are becoming a common and accepted sight on those few occasions when we do go out in public.
On April 16, President Trump, in consultation with medical, public health, and other experts announced national guidelines for re-opening the American economy. The guidelines provide criteria that states and local governments can use as they make decisions on when, where, and how businesses and other entities can resume operation without increasing the risk of a renewed outbreak of COVID-19. For many, no doubt, this is welcome news that offers some hope of a return to a more normal way of life. But many consumers may be wondering what “normal” will look like after the pandemic. With the sweeping changes this public health tidal wave has brought in, will it even be possible to return completely to the way things were before?
Two recent surveys of consumer sentiment shed some light on this question. Conducted in mid-to-late March by marketing consultants Win Big Media and in mid-April by management consultant McKinsey & Co., these consumer surveys may offer important hints about consumer attitudes toward returning to work, travel, entertainment, and other aspects of life with important economic implications.
In the Win Big Media survey, a strong majority of respondents described themselves as concerned “to a large extent,” “to a very large extent,” or “to an extremely large extent” about the coronavirus situation. In aggregate, these three categories accounted for 65% of participants. Almost 66% of respondents expected life to “largely return to normal” in a period ranging from two to six months. Just over 36% of respondents said they either had always worked from home or were working from home now, either because their employer required or permitted it. Twenty-five percent said their jobs did not permit working from home, and a significant 38% of respondents reported that they were currently unemployed. An overwhelming majority of respondents—nearly 71%--said they had “decreased to a large extent” eating out in restaurants. Concerning spending, 61.35% said they had reduced their spending to some extent, ranging from “small” to “large,” while just over 38% said their spending had increased to some extent. Perhaps not surprisingly, majorities of respondents reported a large decrease in plans for travel over the net 90 days. The category of travel activity—which included hotel stays, going to an amusement park or other public destination, or air travel—that the most respondents indicated intentions to undertake was “Drive to see friends or family in another city,” indicated as likely by only about 28% of those surveyed.
In the McKinsey & Co. survey, 35% of respondents described themselves as optimistic that the American economy would rebound in the next two to three months—a rate higher than those reported in most European countries, but trailing the rates in India and China. On the other hand, similar to the Win Big Media survey, 34% said their income or ability to work had been negatively impacted by the pandemic. Forty percent of respondents indicated intentions to reduce spending in the immediate future. In those categories where increased spending was indicated (groceries, at-home entertainment, and household supplies), purchases were expected to be made primarily online. The survey noted a prominent shift to curbside pickup from restaurants and stores and a notable increase in grocery delivery.
Several longer-term implications may emerge as American consumers adjust to the “new normal” following the pandemic. Working from home may become much more commonplace as employers who have been forced to adjust to telework realize that they can maintain productivity while permitting employees more flexible work arrangements. This, in turn, may affect commercial real estate, as demand decreases for offices with many people sitting at desks while using computers. On the other hand, demand for services like home grocery delivery and take-and-bake meals may increase, as consumers maintain as preferences behaviors that originated as adaptations to shelter-in-place mandates. As consumer behaviors drive shifts in shopping, purchasing, and service provision, American businesses will have to adapt in order to survive.
As we continue to face this changing landscape together, our most important hope is that you and your friends and loved ones are staying safe and healthy. If you have questions about the economy, the outlook for the markets, or any other aspect of finances, please get in touch.