How COVID-19 is Impacting Consumer Spending

Coronavirus is a Consumervirus

It’s as deadly to the economy, as it is to people.

In less than two months, COVID-19¹ has ravaged the U.S. economy, savagely infecting consumer behavior as it spreads around the world. And, according to Oxford Economics, it’s estimated the virus will likely lead to $1 trillion in global losses² before it’s stopped.

Here’s Why That Matters

Consumer spending in the U.S. accounts for about 70%³ of the economy. That’s a massive amount of balance precariously placed on the health of consumer behavior. Any move in the wrong direction, and we find ourselves in a very painful predicament.

Our economy depends on China. A lot.

The U.S. supply chain is very closely tied to China. And the American Chamber of Commerce in Shanghai has found that 78% of American companies don’t have enough staff to resume full production⁴. Nearly half said the shutdowns are impacting their global supply chains.

On Feb. 1, Apple closed all of its retail stores and offices in China ⁵.

The impact on consumerism is clear, especially in technology. China makes roughly half of the world’s LCD panels for TVs, laptops, and computer monitors. The longer Coronavirus is in play, the greater the impact will be. Its economic impact⁶ is expected to be worse than:

• 2003 outbreak of SARS
• 2011 Fukushima nuclear disaster
• 2011 Thailand floods

What We Found in Researching Consumers

“We’re seeing the early impact on consumer behavior,” says Jeff Harrelson, COO at MFour. “Eighty-six percent of our consumer panel is limiting social interaction. Travel is social. So, we’d expect other high-traffic businesses to feel the effects³, as the outbreak continues.”

Research highlights from the Surveys On The Go® consumer panel:

• 38% airport decline was observed through GPS tracking on panelists’ smartphones
• 72% of panelists expected the concern of Coronavirus to last more than two months
• 86% planned to limit social interactions, or visits to public places, as a preventive step

This means COVID-19 caused a 38% drop in U.S. consumer behavior.

In early January, the first death⁷ linked to COVID-19 was reported. Consumers took notice. Two weeks later, MFour traced its consumer panel’s visitation to the top 10 U.S. airports. Using the market research app, Surveys On The Go®, the company found a 38% decline in airport visits. The drop correlates to the first reported Coronavirus case in the U.S⁸.

The behavioral data tells us travel was much more impacted than what was stated in the surveys we ran. This is why watching what consumers do is more important than just surveying. As we tracked people, we saw up to a 38% dip in travel, compared to the 23% that was stated in surveys. That’s a 15% shift in behavior, observed by tracking their locations.

The research was conducted comparing visitation to the top 10 US airports by MFour’s consumer panel.  Examined Jan – Feb 2019 vs. the same period 2020.

References:

1. https://www.cdc.gov/coronavirus/2019-ncov/faq.html
2. https://www.oxfordeconomics.com/my-oxford/publications/537166
3. https://fivethirtyeight.blogs.nytimes.com/2010/09/19/consumer-spending-and-the-economy/
4. https://www.amcham-shanghai.org/en/article/supply-chains-and-factory-openings-amcham-shanghai-mini-survey
5. https://qz.com/1800540/how-coronavirus-is-upending-the-tech-industrys-supply-chain/
6. https://www.wsj.com/articles/commentary-supply-chain-risks-from-the-coronavirus-demand-immediate-action-11582054704
7. https://apnews.com/c0e87e089a89fa5579e1c63acded7d46
8. https://www.cdc.gov/media/releases/2020/p0121-novel-coronavirus-travel-case.html

 

This article was originally published by MFour.