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.
Comparing the Speed of U.S. Interest Rate Hikes (1988-2022)
The effective federal funds rate has risen more than two percentage points in six months. How does this compare to other interest rate hikes?
Comparing the Speed of U.S. Interest Rate Hikes
As U.S. inflation remains at multi-decade highs, the Federal Reserve has been aggressive with its interest rate hikes. In fact, rates have risen more than two percentage points in just six months.
In this graphic—which was inspired by a chart from Chartr—we compare the speed and severity of the current interest rate hikes to other periods of monetary tightening over the past 35 years.
Measuring Periods of Interest Rate Hikes
We used the effective federal funds rate (EFFR), which measures the weighted average of the rates that banks use to lend to each other overnight. It is determined by the market but influenced by the Fed’s target range. We considered the starting point for each cycle to be the EFFR during the month when the first rate hike took place.
Here is the duration and severity of each interest rate hike cycle since 1988.
|Time Period||Duration |
|Total Change in EFFR
|Mar 1988 - May 1989||14||3.23|
|Feb 1994 - Feb 1995||12||2.67|
|Jun 1999 - May 2000||11||1.51|
|Jun 2004 - Jun 2006||24||3.96|
|Dec 2015 - Dec 2018||36||2.03|
|Mar 2022 - Sep 2022||6||2.36|
* We considered a rate hike cycle to be any time period when the Federal Reserve raised rates at two or more consecutive meetings. The 2022 rate hike cycle is ongoing with data as of September 2022.
The 2022 rate hike cycle is the fastest, reaching a 2.36 percentage point increase nearly twice as fast as the rate hike cycle of ‘88-‘89.
On the other hand, the most severe interest rate hikes occurred in the ‘04 – ‘06 cycle when the EFFR climbed by almost four percentage points. It took much longer to reach this level, however, with the hikes taking place over two years.
Timing Interest Rate Hikes
Why are 2022’s interest rate hikes so rapid? U.S. inflation far exceeds the Fed’s long-term target of 2%. In fact, when the hikes started in March 2022, inflation was the highest it’s ever been in the last six rate hike cycles.
|Time Period||Inflation Rate at Start of Cycle|
|Mar 1988 - May 1989||3.60%|
|Feb 1994 - Feb 1995||2.06%|
|Jun 1999 - May 2000||1.40%|
|Jun 2004 - Jun 2006||2.89%|
|Dec 2015 - Dec 2018||0.30%|
|Mar 2022 - Sep 2022||6.77%|
Inflation rate is the year-over-year change as measured by the Personal Consumption Expenditures (PCE) Index.
In contrast, three of the rate hike cycles started with inflation at or below the 2% target. Inflation was just 0.30% in December 2015 when the Fed announced its first rate hike since the global financial crisis.
Some criticized the Fed for raising rates prematurely, but the Fed’s rationale was that it can take up to three years or more for policy actions to affect economic conditions. By raising rates early and gradually, the Fed hoped to avoid surging inflation in the future.
Fast forward to today, and the picture couldn’t look more different. Inflation exceeded the 2% target for 12 months before the Fed began to raise rates. Initially, the Fed believed inflation was “transitory” or short-lived. Now, inflation is a top financial concern and there is a risk that it has gathered enough momentum that it will be difficult to bring down.
Balancing Inflation and Recession Risks
The Fed expects to raise its target rate to around 4.4% by the end of 2022, up from the current range of 3-3.25%. However, they don’t foresee inflation reaching their 2% target until 2025.
In the meantime, the rapid interest rate hikes could lead to an economic downturn. Risks of a global recession have increased as other central banks raise their rates too. The World Bank offers policymakers a number of suggestions to help avoid a recession:
- Central banks can communicate policy decisions clearly to secure inflation expectations and, hopefully, reduce how much they need to raise rates.
- Governments can carefully withdraw fiscal support, develop medium-term spending and tax policies, and provide targeted help to vulnerable households.
- Other economic policymakers can help relieve supply pressures through various measures. For instance, they can introduce policies to increase labor force participation, enhance global trade networks, and bring in measures to reduce energy consumption.
Will policymakers heed this advice and, if so, will it prove sufficient to avoid a global recession?
Visualized: The World’s Population at 8 Billion
Our population will soon reach a new milestone—8 billion. These visualizations show where all those people are distributed around the world
Visualized: The World’s Population at 8 Billion
At some point in late 2022, the eight billionth human being will enter the world, ushering in a new milestone for humanity.
In just 48 years, the world population has doubled in size, jumping from four to eight billion. Of course, humans are not equally spread throughout the planet, and countries take all shapes and sizes. The visualizations in this article aim to build context on how the eight billion people are distributed around the world.
For extended coverage of this moment and what it means to the world, you can get access to our full report and webinar by signing up to VC+, our premium newsletter.
Now, here’s a look at each country’s population as of September 2022:
|Global Rank||Country/Region||Population (2022)|
|3||🇺🇸 United States||335,391,957|
|16||Democratic Republic of Congo||96,104,525|
|92||United Arab Emirates||10,164,747|
|97||Papua New Guinea||9,342,727|
|104||Hong Kong SAR||7,635,279|
|125||Central African Republic||5,025,077|
|136||Bosnia and Herzegovina||3,235,985|
|154||Trinidad and Tobago||1,409,672|
|173||Micronesia (Fed. States of)||561,300|
|188||Sao Tome and Principe||228,652|
|196||Saint Vincent and the Grenadines||111,732|
|199||United States Virgin Islands||104,083|
|200||Antigua and Barbuda||99,773|
|202||Isle of Man||86,049|
|208||Northern Mariana Islands||58,336|
|211||Saint Kitts and Nevis||54,052|
|214||Turks and Caicos||39,924|
|220||British Virgin Islands||30,687|
|227||Wallis and Futuna||10,818|
|230||Saint Pierre & Miquelon||5,732|
Below are regional breakdowns of population.
Africa’s Population by Country
As of 2022, Africa’s total population stands at 1.4 billion people. Many of the countries with the fastest growth rates are located in Africa and by 2050, the population of the continent is expected to jump to 2.5 billion.
Nigeria is Africa’s most populous country and its largest economy. Based on current growth rates, Nigeria’s largest city, Lagos, could even emerge as the world’s top megacity by the end of the century.
Africa has by far the lowest median age of any of the other continents.
Asia’s Population by Country
With 4.7 billion people in 2022, Asia is by far the world’s most populous region.
The continent is dominated by the two massive population centers of China and India. In 2023, a big shift will occur, with India surpassing China to become the world’s most populous country. China has held top spot for centuries, but the mismatch between the two countries’ growth rates made it only a matter of time before this milestone arrived.
Asia is a region of contrast when it comes to population growth. On the one end are countries like Singapore and Japan, which are actually shrinking. On the other, are Middle Eastern nations like Oman and Qatar, which have robust population growth rates of 4-5%.
Vietnam is on the cusp of becoming the 15th country to surpass the 100 million population mark.
Europe’s Population by Country
Europe’s population in 2022 is 750 million people—more than twice the size of the United States.
A century ago, Europe’s population was close to 30% of the world total. Today, that figure stands at less than 10%. This is, in part, due to population growth throughout other regions of the world.
More importantly though, Europe’s population is contracting in a number of places—Eastern Europe in particular. Many of the countries with the slowest growth rates are located in the Balkans and former Soviet Bloc countries.
Russia remains Europe’s largest country by population. Although the country’s landmass extends all the way across Asia, three-quarters of Russia’s people live on the European side of the country.
Germany is the second largest country in Europe, followed by the UK, France, and Italy.
Ukraine is the seventh largest population center in Europe, but it remains to be seen how the current conflict with Russia impacts the country’s long-term population prospects.
North America’s Population by Country
North America’s population is 602 million people as of 2022.
The continent is dominated by the United States, which makes up more than half of the total population. America’s population is still growing modestly (by global standards), but perhaps more interesting are the internal migration patterns that are occurring. States like Texas and Florida are seeing an influx from other states.
Canada has one of the highest population growth rates of major developed economies thanks to international migration.
Mexico is currently the 10th most populous country, but will eventually be bumped from the top 10 list by fast-growing African nations.
South America’s Population by Country
The population of South America in 2022 is 439 million. Brazil makes up nearly half of that total.
Sometime this decade, Colombia’s capital, Bogotá, will become the region’s fifth megacity (which is defined as having a population of 10 million or more). São Paulo, Rio de Janeiro, Buenos Aires, and Lima are South America’s current megacities.
Oceania’s Population by Country
The population of the Oceania region is 44 million people—just slightly higher than the population of California.
Australia, New Zealand, and Papua New Guinea make up the lion’s share of the population of this region.
Interestingly, many of the smallest countries by population can also be found in this region.
When Will Earth’s Population Hit 9 Billion?
The next global population milestone—nine billion—will likely be hit sometime in the 2030s.
In fact, Earth’s population is expected to continue growing until it hits a peak at some point in the 2080s—possibly over the 10 billion mark.
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