The delayed consumer pivot is another reason—among many—why the global shipping crisis will take at least until mid-2022 to resolve, and firms should continue to anticipate and adapt to high shipping costs and prolonged delays. Retailers and consumer goods firms can expect continued strong demand from most developed markets for all of 2022, but shipping delays, shortages, and inflation pose risks to the consumers spending outlook.
Overview
Since the pandemic began, consumers across developed markets have shifted massively away from spending on in-person services and toward spending on goods. Because of the surge in demand for goods, particularly via e-commerce channels, the global shipping industry has buckled under the weight of increased merchandise trade flows. As Western developed markets began to reopen in Q2 2021, consumers gradually spent more on travel, dining, and entertainment. In the US, spending on accommodation & food services has surged 31% this year. In the eurozone, revenue for accommodation and food service establishments has doubled since last December. Despite the shift toward service spending, consumers are still spending significantly more on goods than they did before the pandemic. In the US, spending on durable goods is still 17% above pre-pandemic levels. In the UK and eurozone, retail sales are still 4% higher than in January 2020 even despite the recovery in services.
Our View
Although the “consumer pivot” from goods spending to service spending has been underway since March, it is moving slowly. There are two main reasons why consumers are still buying more “stuff” than prior to the pandemic. First, a surge in virus cases driven by the spread of the Delta variant dampened the service sector recovery this summer, particularly in the US, where spending on spectator sports, live entertainment, and cinemas are still down more than 60%. Second, large government transfers to households across developed markets during the pandemic have created a massive stock of pent-up consumer savings that are yet to unwind. As a result, consumers are still able to spend on goods even while gradually increasing their services spending. In the coming months, we expect the consumer pivot to continue, but the persistence of COVID-19 and the potential emergence of new variants will prevent a sudden shift toward services.
At FrontierView, our mission is to help our clients grow and win in their most important markets. We provide the research, data, and insights you need to outperform the competition. Subscribe to our weekly newsletter The Lens published by our Global Economics and Scenarios team which highlights high-impact developments and trends for business professionals. For full access to our offerings, start your free trial today and download our complimentary mobile app, available on iOS and Android.