The current economic environment is in a decline. There’s not a major surprise there, as many businesses – if not all, are feeling the heat from the COVID-19 pandemic.
Mintel has released new research analysing the current economic environment, compared to that of the Great Recession, including insights on the economic indicators that will play a role in predicting consumer spending in the months and years ahead.
The differences
The Great Recession was largely impacted by failures in the housing and banking industries. Today’s crisis, however, is out of human control, and one that we can’t yet solve.
Furthermore, the financial system today is fundamentally sound. Americans are hyper-aware of the economic repercussions and due to the pandemics impact on lifestyles and skyrocketing jobless claims, consumers have adopted more conservative habits.
“As the economic implications of COVID-19 unfold, Americans are simultaneously dealing with not only immediate concerns around physical health and lifestyle changes, but also longer-term concerns about their financial health,” says Director of Mintel Reports US, Fiona O’Donnell.
“Expect to see consumers evaluate their lifestyles and reduce discretionary spending. With economic recovery contingent on COVID-19 containment, consumer confidence will lag, followed by a sharp contraction later this year.”
Future predictions
After analysing the 2007-09 recession, research provided by Mintel suggests that there are four economic indicators that play an important role in predicting consumer spending patterns: unemployment, confidence, income and savings rate.
There are not many factors as influential to consumers, as unemployment rate.
“Fewer Americans working means less spending and a focus on the necessities. This downturn promises to alter consumer priorities beyond the recovery period. Perceptions of value will change and consumers will question whether premium-priced products are worth the additional costs.
“The usual sectors like dining out, travel, out-of-home entertainment, and others that support personal indulgence have largely already been eliminated and consumers have learned that they can do without. Other former ‘necessities’ will come under question as the sphere of living grows tighter and doing more with less becomes the lens through which consumers must focus their decision making,” concludes Ms O’Donnell.