Consumer spending on durables surged during COVID. Strong government support across much of the world supported households during the worst of the COVID crisis. As consumer services shut down and people were forced to stay at home, demand for consumer durables exploded in 2020.

However, spending on durables is expected to fade. Though spending on consumer durables remains significantly higher than peak pre-COVID levels, spending is expected to continue falling back toward pre-COVID trends. This is further reflected in US manufacturers’ new orders, which have fallen below pre-COVID levels despite ongoing low inventories that require restocking.

Fading fiscal support and depleted savings will impact spending growth from lower-income households in many countries, while the reopening of domestic services and retail storefronts will impact demand patterns and channels. Though consumer durables’ demand remains above pre-COVID levels, expect a substantial decline from 2021 demand levels as consumers spend less and pivot to services.

Around the Regions:

In the US, consumer services’ demand just recovered to pre-COVID levels prior to the Delta variant’s arrival: The domestic reopening of the US economy serves as a good indicator for understanding how domestic demand may evolve in other countries as their domestic reopening occurs.

Ongoing fiscal support and a delayed domestic reopening will lead to accelerated consumer spending growth in Japan and WEUR: In contrast to the US, WEUR’s and Japan’s fiscal support will continue to drive above-trend consumer spending growth in 2021. Combined with a somewhat later and more tepid reopening for their domestic service economies, both regions will see a significant growth acceleration in 2022.

The ASEAN region faces another challenging year: As one of the slowest regions to roll out vaccines and still reeling from massive outbreaks from the Delta variant, depleted savings, weak fiscal impetus, and a weak outlook for tourism have had a dramatic impact on local consumption.

Chinese government shifts to “shared prosperity” policies: In the coming years, China’s leadership will show less forbearance to wealthy individuals and large corporations; instead, it will expect them to support its goals for social equality through measures such as direct transfers, donations, program development, and tax changes. China’s regulatory landscape will also shift in favor of industries that are seen to serve lower-income segments and against those seen to serve higher-income segments.

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