Watching web searches, measuring our movements, and scrutinising business surveys has provided an early insight of how the coronavirus crisis is affecting spending. The economic impact of COVID-19 will be enormous, but service firms will be impacted most.
The global service-sector PMI – a survey of purchasing managers – fell to the lowest reading in its 22-year history in March, down 10.1 points to 37.0 when any reading below 50 is a contraction. But internet searches and traffic figures also give a fast international illustration of how lockdowns are changing consumer spending patterns.
Searches for travel, restaurants and football have fallen by around 80 per cent, for instance, but have risen for food delivery and TV subscriptions. Home-improvement spending has picked up with more people looking at ‘how to’ websites – but fewer looking at home or furniture sites.
Both online clothing retailers and bricks-and-mortar fashion stores have seen fewer searches, but with shoppers staying at home, 'loungewear' volumes have soared nearly 800 per cent while 'dresses' and 'heeled shoes' each have fallen about 60 per cent.
The shift from offline to online is clear elsewhere: education searches are down but up for language-learning apps. And the switch can mean savings: gym membership searches are down but home-workouts much higher.
Food demand has risen, with searches for recipes up more than 40 per cent, but while UK supermarket sales increased, searches for deliveries are up even more.
The crisis makes real-time data that tracks personal movements increasingly useful. They show traffic volumes substantially down in major cities as people spend less time in shops and recreational venues. Time spent in grocery stores is down by a third as shoppers make fewer trips outside but spending per visit may be significantly higher, despite empty supermarket shelves.
Less time at the office and on transport means spending on fares, coffees, lunches, cinemas and restaurants will be close to zero, but UK e-commerce sales of health and beauty during one week in March were up 32 per cent on 2019 with electrical goods up 42 per cent. Luxury items and travel sales fell, however, and clothing sales dropped 27 per cent.
US fitness-equipment sales rose 55 per cent online and computers 40 per cent, as employees started working from home. But these are one-off purchases, often before lockdowns took full effect.
Country-level PMIs are watched keenly by investors but there is sector-level data too. Tourism & recreation reached a record low in March with the drop most evident in Europe, where the index crashed to just 13.7.
The property index fell to almost 30 and transport, media and professional services also saw sharp drops, suggesting the economic impact extends beyond those sectors forced to close. Only the food sector index was positive in March, but only just, so spending there may not offset declines elsewhere.
But while the falls are likely to be sharp, the rebound may not be. The experiences of countries with less tight restrictions – including Sweden, Singapore or Japan – suggest it may be some time before normality returns. And lost incomes mean much of the impact will fall on those with low-paid, unsecure employment – people with the higher propensity to spend.
First published 9 April 2020.
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