LONDON- Michael Clark of Amy’s Housewares has one big fear as its London stores prepare to reopen on June 15 along with other retailers around Britain: “Customers not spending, having no trust in the economy.”
His concern, captured in a survey by the British Independent Retailers Association (BIRA) before a nationwide easing of social distancing measures, may be well founded.
Across the world, consumers are emerging from lockdowns warier and more thrift-conscious than before. That will drag on any recovery and could encourage governments and central bankers to follow up on coronavirus handouts with more costly stimulus.
The new thrift is showing up in various ways: some households are hoarding the cash they saved during lockdowns; some are flocking to cheaper brands or sticking with essentials.
Other risks to consumer demand include the outright collapse of purchasing power among those whose livelihoods were ruined by the pandemic and even imponderables such as what happens to spending patterns if more people continue to work from home.
In China, shopping malls began to fill up again from April after lockdown eased. Online sales have surged in some categories, often helped by discounts and state coupons.
But a lingering wariness about items deemed non-essential means consumers may still not emerge as the pillar of growth which Beijing hopes they will be.
“Consumers are placing a greater focus on essential spending categories,” Fitch Solutions said in a June 4 report, predicting a fall in Chinese household spending this year and slashing its 2020 growth forecast to just 1.1 percent from 5.6 percent before the pandemic.
In the United States, commonplace brands such as chocolate giant Hershey or toothpaste-maker Colgate say consumers have traded down. Dollar stores, meanwhile, expect to open their doors to a new set of customers as they did after the 2008-09 Great Recession.
“In 2008, folks lost jobs … and they found us. And I think that’s some of what we’re planning for as we take a look into our crystal ball at back half of the year and 2021,” Dollar Tree Chief Executive Gary Philbin said on May 28.
Much hangs now on what happens to the mountain of savings built up by those US households which weathered the worst of the lockdown fall-out and have pushed the overall US savings rate to a record 33 percent of income.
While that rate will fall, those who expect cash to flood back into the economy may be disappointed. A 2012 paper by IMF researchers found that lingering uncertainty after the onset of the 2008-09 recession boosted saving rates durably, leading to lower consumption and growth in the wider economy.
