COVID-19 Dropping Consumer Confidence Sharply
Globally, consumer confidence is dropping significantly with coronavirus spread, its effects are sweeping across the world economy impacting businesses and personal spending.
Have you ever imagined staying at home for 2 months straight, without even taking one step out of your door? Well this is what my family has been through. Due to COVID-19, my family and I have been in quarantine and self-isolation to fight this highly contagious respiratory illness. In addition to people’s health, the coronavirus is also impacting the world financially. Not only is the coronavirus contagious, but unfortunately, so is consumer confidence. Consumer confidence measures the degree to which consumers feel confident about how well the economy is doing. This influences how much money consumers are willing to spend.
Consumer confidence is important because the less you spend, the less companies are going to earn money which results the workers to earn less. When people work less, they are not as willing to spend their money and they would save it more rather than spending. This would be a chain going on and on and it will be a flow on effect where it impacts bigger and larger communities. It had also personally affected my family. It had affected my mom’s income in the short term. She is a professor and she need to travel a lot but the coronavirus has blocked her. Her overall budget got smaller because she isn’t earning as much so she needs to save more rather than spending. Currently many shops are closed down so it is also limiting her options to spend. She had to learn to save and manage her money rather than spending on things she doesn’t need. Since the global economy dropping and her budget got smaller, she is extra careful with her spending. She will adjust her budget once the world economy recovers in the long term.
In Australia, the COVID-19 had affected huge companies like Qantas. In Qantas, about 150 planes will be grounded until the crisis is over and it also shut down international flights and slashed domestic flights through Qantas by 60%. Now, Qantas is standing down 20,000 people because they don’t need as many people to work since there is less to do. This happened because there are far fewer people buying plane tickets and willing to buy plane tickets which is because of lower consumer confidence. These 20,000 people that has been stood down all have a family and with no income, which will affect consumer confidence even more. With less money to spend and in the need for more money, decisions like buying houses is unlikely, an economist, AMP’s Shane Oliver, estimate that prices could fall as much as 20% if the recession lasts more than six months. “As the coronavirus pandemic broadens, and the probability of an Australian recession increases, consumer confidence is trending lower from an already weak position,” CoreLogic told the gaurdian. “This will likely weigh on high-commitment consumer spending decisions, such as buying or selling a home.” Buying a house is a big decision and especially with the fall of consumer confidence, these high commitment spending decisions will be less likely to happen in the short term.
In addition to Australia, consumer confidence has also fallen in some of the world’s largest economies such as the US, Japan, and China. According to Market Insider, in the US, consumer confidence has been declining for 6 weeks falling nearly 2.5% to 111.36. Likewise, in Japan, consumer confidence has fallen a jarring 8.7% since January 1. Market Insider said the decline came at the same time that the number of coronavirus cases increased. Now globally, the coronavirus has affected greatly many other places too. Like my mother who had to stay at home, the people in America also had to stay at home. A report from JPMorgan Chase, a bank, estimates that the virus reduced cinema-ticket receipts by 20%. Attendance at Broadway shows has also dropped. And while these problems are mostly in the short term, in the long term, things such as healthcare, transportation, commerce, and utilities could be disrupted. The exportation in China plummeted by 17% and this will affect many companies around the world since China produces a large number of products. It disrupted global supply chains, damped business activity and blocked transport across the world’s second-largest economy.
In conclusion, although the coronavirus has made it’s impacts, but it is all mostly short-term effects. In the long term, it will only need time to heal. Time will heal the economy and the world back to normal, just like how it had when it healed SARS and other influenzas. As the economy gets back to normal, consumers will be more willing to spend on especially big costs like housing. The Coronavirus will heal in time but now, we have to cooperate with time, stay at home, keeping social distance, and always wash your hands so this virus will end quicker and the world will heal sooner.