Hyderabad: The COVID-19-led economic recession was dominated by the collapse in consumer spending making the consumer more important than ever for achieving economic recovery, says a recent report by the World Economic Forum (WEF).
According to the report, the Covid-19 global pandemic has triggered a major consumption shock similar to what happened during the Great Depression (1930s) and World War II (1939-45).
“Consumer spending in the US and major Western European economies (France, Germany and the UK) declined between 11% and 26% respectively in Q2 2020 versus Q4 2019. In China, the consumption drop in Q1 2020 was also severe, about 17%,” said the report, while adding, “The drop in consumption is by far the largest since the 1930s Great Depression in the US and since World War II in Europe.”
The report further pointed out that the lockdowns and health fears have adversely impacted the services sector.
“In contrast to past recessions, the decline in consumer spending occurred primarily in services, which contributed between 70 per cent and 90 per cent of the peak-to-trough fall in consumer spending in the US, Western Europe and China,” the report said.
Impact of the pandemic on consumer behaviour
According to the report, the pandemic hastened the adoption of digital products and services and these digital spending habits will outlast the pandemic.
“The pandemic hastened the adoption of digital products and services with a step-change in healthcare, a near doubling of online grocery shopping and widespread adoption of streaming services that will continue,” it observed.
As the definition of home now includes work, fitness and entertainment, spending on home improvement will go up, said the report.
“Home nesting will remain an enduring lifestyle for many, facilitated by consumers’ elevated rates of investment in home improvement and continuing opportunities to work from home,” concluded the report.
