Source: Sharon Wood, Business Maverick, 6 April 2021, photo credit, CFO
Economic views are divided on how much and how consumer spending will change as we emerge from the Covid-19 pandemic. What isn’t up for debate is that some spending patterns will revert to pre-pandemic trends, but others will be forever different.
Much of the nature and extent of the global economic recovery will ride on whether the much-anticipated pent-up demand is released into the economy through consumer spending and also what the nature of that spending will be.
Just like divergent economic growth experiences across the world, different consumer segments are also likely to follow distinctive growth trajectories — some of which are already proving surprising.
Economists continue to have mixed views on how vigorous the upswing in spending will be, with the debate of the year being whether this will bring back inflation or not. Some say there is a wall of money waiting in the form of pent-up demand. But others predict that much of the spending has already taken place in the US and that the boost from fiscal incentives will be short-lived. Others highlight that it will very much depend on how consumer behaviour changes compared with the pre-Covid spending patterns.
So what are current statistics telling us about consumer demand and emerging spending patterns? The US and China are undoubtedly out of the starting blocks with respect to spending, while Europe and South Africa are trailing behind. However, South Africa could well pip Europe to the post because of its better Covid-19 position currently and a higher than expected increase in latest vehicle sales — considered a good leading indicator of consumer spending.
UBS CIO Paul Donovan has a colourful way of describing the differences in consumer spending in the US versus Europe. Regarding the US, he says: “As restrictions ease, spending on restaurants and other personal services are increasing. People are switching spending to having fun (fun means something that you can post about on Instagram).”