Categories: Retail

Nationwide Insurance Chief Economist Encourages Conditional Retail Forecasts

Retailers looking for the shape of an economic recovery have had several letters to choose from. There’s the “hoped for” V-shaped recovery that heralds a quick return to pre-COVID consumer spend levels. There’s the U-shaped recovery that says the return will only happen after a long period of flat sales. Then there’s the W-shaped recovery that predicts a fast comeback, only to be kneecapped by a secondary infection surge and then another comeback. But for Nationwide Insurance Chief Economist David Berson, there’s only one shape: It’s a V, and the V stands for “virus.”

“There's nothing in the economic toolkit that addresses the coronavirus,” Berson told PYMNTS. “There are things in the economic toolkit that address inflation. There are things in the toolkit that model economic policy and that sort of thing. So we can mitigate the economic damage from the coronavirus, but that doesn't solve it. What solves it is science and the pharma industry. I think they’re both doing a great job – but even that only goes so far in predicting a recovery.”

For Berson and other economic forecasters, consumer spending and other key indicators will depend entirely on the lifespan and dynamics of the pandemic. If infection rates go up, as they have in several states, the recovery will be stalled. If infections drop, retail spend has a better chance of recovering. No letters, patterns or retail bailouts will be more powerful than COVID-19.

That means retailers who have to plan for 2020 – including the critical holiday season – at a loss. Berson recommends drawing up several scenarios based on the virus spread and the government’s reaction to it. He allows that forecasting in the middle of a pandemic is difficult, but he does not side with recent corporate pronouncements about abandoning financial guidance or heading into 2020 without a plan.

“If you don't forecast, what are you going to do? You can't be in a retail business or any business without a plan,” he said. “But the plan is so dependent upon how the virus propagates. If and when we come up with first therapeutics and then a vaccine, that’s one scenario. And you have to factor in government response. It's very difficult to know any of those things. So I recommend having scenarios. If the virus does this, then this is the most likely thing to happen for our sales.”

Berson and his team have developed proprietary internal models for Nationwide. For retailers, he does have some indicators that could help with scenario planning and forecasting. Again, they are conditional forecasts based on the virus, not consumer behavior. Berson is encouraged that retail sales have rebounded, but he’s concerned about new hotspots such as Arizona, Texas and Florida.

“If I were forecasting for a retailer, I would say that if the virus only goes to a certain level and there are no restrictions, then I think sales will reach a certain level just based on the regular economics, such as how many people are not working,” he explained. “But if the infection rate and hospitalization rates go up significantly, then there may be some additional restrictions, and the pace of sales will not go up as rapidly. The forecasts are conditional on what happens with the virus.”

Get our hottest stories delivered to your inbox.

Sign up for the PYMNTS.com Newsletter to get updates on top stories and viral hits.

——————————

PYMNTS TV LIVE OCTOBER SERIES: B2B PAYMENTS 2021 – WHAT WILL YOU CHANGE?

Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border. Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.

Recent Posts

NEW REPORT: How Voice Assistants Help Win Consumer Spend – And Their Trust

More than 100 million consumers in the United States have switched from shopping in stores…

2 hours ago

Mastercard Aims To Fight ‘Gobbledygook’ On Online Card Statements

It’s happened to almost all consumers: They’re idly perusing their credit card statements when they…

2 hours ago

OAK + FORT: Flexible-Payment Plans Boost Luxury Purchases

Dramatic shifts are underway in the retail sector as it adjusts to consumers’ increasingly digital…

2 hours ago

‘What Did You Change?’ 34 Payments Execs Weigh In On Payments, The Pandemic And New Possibilities

The end of the third quarter of 2020 offers a moment to look back —…

2 hours ago

Ceridian: Payroll Modernization Readies The Public Sector For Next-Gen Talent

The public sector has a unique challenge ahead. An estimated 40 percent of professionals in…

2 hours ago

The Three Things Every Digital-Card App Needs

The wave of digitization that has picked up incredible speed in banking over the past…

2 hours ago