For the digital consumer — for the U.S. economy — a recovery is in the cards, yes.
But it will take a while.
Much longer than the 12 weeks it took to mint the digital-first consumer in the first place.
As detailed in PYMNTS research titled “How A Global Pandemic Created A Digital-First Customer In 12 Weeks,” the reopening has begun.
But to paraphrase a (not so old) baseball movie, if you reopen it, will they come? At this writing more than 131,000 Americans have died from COVID-19, with nearly 3 million confirmed cases. Unemployment has skyrocketed, reaching a peak as businesses shuttered, touching more than 14 percent before backing off to a recent 11 percent. Stimulus spending? Plenty — at more than $3 trillion, and possibly more is on the way.
Back in March, as the pandemic began to take hold — and there were fewer than 1,000 cases here — more than 65 percent of consumers we surveyed said that media coverage might be making the situation look more serious than it was.
And then, of course, it all shifted. As the pandemic took root, we stopped moving around. About 43.8 percent of consumers told us they were traveling for personal reasons less often than they had before the outbreak. Cross-border hops became a thing of memory as more than 49 percent said they were traveling internationally for personal reasons less often.
Dining habits also shifted, with 35.3 percent reporting dining less at quick service restaurants (QSRs) and 35.9 percent going to sit-down restaurants less often than in pre-pandemic days.
Along the way, worries about one’s livelihood got worse. Losing one’s job went from a remote concern for many in March to an acute concern across an increasingly wide share of consumers. To put some numbers on it: 48.8 percent of U.S. workers — approximately 77.4 million people — were worried they might lose their jobs, with 28.5 percent saying they were “very” or “extremely” concerned. By April, only 40.9 percent of U.S. consumers reported having jobs or earning incomes.
Where there are jobs and income there is spending, of course. Some 22.9 percent of those respondents also said they were struggling to pay monthly bills — and perhaps predictably, they’re shopping less.
At least some of the shifts will be long lived — perhaps permanent — especially when it comes to doing everything from home. Extrapolating the data a bit, 53 million of the 156.6 million consumers who were eating at restaurants less often plan to place restaurant orders from home more often.
In terms of permanence, 24.7 million are simply done with dining out in a restaurant, even once the pandemic passes.
Drilling down a bit to groceries, roughly 136.6 million consumers were grocery shopping less often as of April 11 than they did before the outbreak. Of that tally, 48.2 million plan to permanently do so less often even after the pandemic is over. As for permanence, 19.7 million will simply not go back to shopping for groceries in brick-and-mortar stores at all.
Writ large for retail in general, 33.2 million consumers have been shopping for non-grocery products less often than in the past. Roughly 26.5 million have relocated their shopping habits to online. They won’t return to brick-and-mortar.
By early May, PYMNTS data estimated that 32.5 percent of consumers who shopped for retail goods had moved to bits and bytes.
In a nutshell, then, people are spending less, but when they do spend, they do it online. And as for a recovery, they’re looking to January 2021.
And yet we’re six months away from that, with the all-important holiday season to get through before then.
The road will be rocky. Goldman Sachs this week trimmed its gross domestic product (GDP) forecast for the current quarter, to 25 percent from 33 percent. That means that GDP will contract by 4.6 percent rather than 4.2 percent, according to Goldman. That comes amid slower than expected consumer spending.
"The healthy rebound in consumer services spending seen since mid-April now appears likely to stall in July and August as authorities impose further restrictions to contain virus spread,” Goldman estimated.
Last month, the Federal Reserve estimated that Fed officials indicated that, as noted in The New York Times, the unemployment rate will close 2020 at 9.3 percent, touching 5.5 percent in 2022.
That might temper the consumer spending jump of 8.2 percent in May that was reported late last month. That represented the biggest increase since the federal government began tracking the number in 1959. We noted, however, that the jump in consumer spending was tempered by a 4.2 percent decline in personal income. The personal income metric across the U.S. is expected to take an additional hit at the end of July.
That’s when an additional $600 a week in unemployment benefits, paid for by the federal government, is slated to sunset. Overall, consumers spent an additional $892.6 billion in May, with a majority of that money, $590.4 billion, going to pay for goods. The increase was led by more spending on cars and trucks and auto parts, as well as “recreational goods and vehicles.” We get a sense of getting away from it all, then.
As to what comes next: Late last month, there was a bit more caution in the wind. In late June, as the consumer sentiment survey in June slipped to 78.1 from an initial 78.9, as reported by the University of Michigan. That indicates, perhaps, a softening of intent to spend — perhaps for a while.