How COVID-19 Consumer Spending is Impacting Industries
Consumer spending is one of the most important driving forces for global economic growth.
Beyond impacting some of the factors that determine consumer spend—such as consumer confidence, unemployment levels, or the cost of living—the COVID-19 pandemic has also drastically altered how and where consumers choose to spend their hard-earned cash.
Today’s graphic pulls data from a global survey by McKinsey & Company that analyzes how consumers are reining in their spending, causing upheaval across every industry imaginable.
While some industries are in a better position to weather the impact of this storm, others could struggle to survive.
The Link Between Sentiment and Intent to Spend
As consumers grapple with uncertainty, their buying behavior becomes more erratic. What is clear however, is that they have reduced spending on all non-essential products and services.
But as each country moves along the COVID-19 curve, we can see a glimmer of increasing optimism levels, which in turn is linked to higher spending.
India’s consumers, for example, are displaying higher levels of optimism, with more households planning to increase spend—a trend that is also evident in China, Indonesia, and Nigeria.
Meanwhile, American consumers are still more optimistic about the future than Europeans. 37% of Americans believe the country will recover in 2 or 3 months—albeit with optimism levels at the highest for people who earn over $100K.
Strategic Consumer Spending
Globally, consumers continue to spend—and in some cases, spend more compared to pre-pandemic levels—on some necessities such as groceries and household supplies.
Due to changes in media consumption habits, consumers in almost all countries surveyed say they will increase their spend on at-home entertainment. This is especially true for Korea, a country that already boasts a massive gaming culture.
As restrictions in China lift, many categories such as gasoline, wellness, and pet-care services appear to be bouncing back, which could be a positive sign for other countries following a similar trajectory. But while consumers amp up their spending on the things they need, they also anticipate spending less in other categories.
The Industries in the Red
Categories showing an alarming decline include restaurants and out-of-home entertainment.
However, there are two particularly hard-hit industries worth noting that are showing declines across every category and country:
Travel and Transport
The inevitable decline in the travel and transportation industry is a reflection of mass social isolation levels and tightening travel restrictions.
In fact, the U.S. travel industry can expect to see an average decline in revenue of 81% for April and May. Throughout 2020, losses will equate to roughly $519 billion—translating to a broader $1.2 trillion contraction in total economic impact.
According to the World Travel and Tourism Council, a staggering 50 million jobs are at risk in the industry, with 30 million of those jobs belonging to employees in Asia.
Considering the travel and tourism industry accounts for 10.4% of global GDP, a slow recovery could have serious ramifications.
Apparel is experiencing a similarly worrying slowdown, with consumption 40-50% lower in China compared to pre-pandemic levels. Both online and offline sales for businesses the world over are also taking a major hit.
As consumers hold back on their spending, clothing brands of all shapes and sizes are forced to scale back production, and reimagine how they position themselves.
“It’s an unprecedented interruption of an industry that has relied on speeding from one season’s sales to the next. And it is bringing with it a new sense of connectedness, responsibility and empathy.”
—Tamsin Blanchard, The Guardian
Towards an Uncertain Future
Clearly the force majeure that is COVID-19 has not impacted every industry equally.
For some, rebuilding their customer experience by appealing to changing values could result in a profitable, and perhaps much-needed revival. For other companies, there is no other choice but to play the waiting game.
Regardless, every industry faces one universal truth: life after the pandemic will look significantly different.
Ranked: The World’s 50 Top Countries by GDP, by Sector Breakdown
This graphic shows GDP by country, broken down into three main sectors: services, industry, and agriculture.
Visualized: The Three Pillars of GDP, by Country
Over the last several decades, the service sector has fueled the economic activity of the world’s largest countries. Driving this trend has been changes in consumption, the easing of trade barriers, and rapid advancements in tech.
We can see this in the gross domestic product (GDP) breakdown of each country, which gets divided into three broad sectors: services, industry, and agriculture.
The above graphic from Pranav Gavali shows GDP by country, and how each sector contributes to an economy’s output, with data from the World Bank.
Drivers of GDP, by Country
As the most important and fastest growing component of GDP, services make up almost 60% of GDP in the world’s 50 largest countries. Following this is the industrial sector which includes the production of raw goods.
Below, we show how each sector contributes to GDP by country as of 2021:
|🇰🇷 South Korea||57.0||32.4||1.8||8.8||$1.8|
|🇸🇦 Saudi Arabia||46.5||44.7||2.7||6.1||$0.8|
|🇭🇰 Hong Kong||89.7||6.0||0.1||4.3||$0.4|
|🇿🇦 South Africa||63.0||24.5||2.5||10.0||$0.4|
Industrial sector includes construction. Agriculture sector includes forestry and fishing. *Data as of 2019.
In the U.S., services make up nearly 78% of GDP. Apart from Hong Kong, it comprises the highest share of GDP across the world’s largest economies. Roughly 80% of American jobs in the private sector are in services, spanning from healthcare and entertainment to finance and logistics.
Like America, a growing share of China’s GDP is from services, contributing to almost 54% of total economic output, up from 44% in 2010. This can be attributed to rising incomes and higher productivity in the sector as the economy has grown and matured, among other factors.
In a departure from the top 10 biggest countries globally, agriculture continues to drive a large portion of India’s GDP. India is the world’s second largest producer of wheat and rice, with agriculture accounting for 44% of the country’s employment.
While the services sector has grown in India, it makes up a greater share in other emerging economies such as Brazil (58%), Mexico (59%), and the Philippines (61%).
Services-led growth has risen faster than manufacturing across many developing nations, underpinned by productivity growth.
This structural shift is seen across economies. In many countries in Africa, for instance, jobs have increasingly moved from agriculture to services and trade, where it now accounts for 42% of jobs.
These growth patterns are supported by rising incomes in developing economies, while innovation in tech is lowering barriers to enabling service growth. As the industrial sector makes up a lower share of trade and economic activity, the service sector is projected to make up 77% of global GDP by 2035.
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