As millions of people across Europe and the U.S. remain confined to their homes amid the coronavirus outbreak, the impact on consumer behavior and businesses alike have been swift and harsh. And according to several recent reports, companies are bracing for layoffs while consumers are already seeing a reduction in household income.
In a research note this morning from Telsey Advisory Group, Dana Telsey, chief research officer, said with the “quick pace that Covid-19 is impacting the fabric of the U.S. economy, and the response to this pandemic of placing the population in stay-at-home and work-from-home modes, essentially shutting down the economic valve of consumer spending, which accounts for two-thirds of the GDP, American businesses are working to figure out what has never been done — managing cash burn with nearly a zero-revenue budget.”
To respond to these dire conditions, Telsey said expenses will need to be cut while “inventory needs to be marked down, and capital spending needs to be reduced to the minimum maintenance level.” From a workforce perspective, Telsey said the industry’s 52 million retail workers are threatened by layoffs.
In a consumer sentiments report from McKinsey & Co. released this past weekend, researchers said one-third of U.S. consumers already report “reduced income.” The firm also noted shoppers are being more mindful and thrifty with expenditures during the Covid-19 outbreak.
Late last week, Coresight Research polled consumers to gauge their concerns about the outbreak. “Some 79 percent of respondents are somewhat or extremely concerned about the coronavirus,” said authors of the report adding that 4.2 percent had lost their job because of the coronavirus outbreak, with a further 12.7 percent worried they could.”
“A much more widespread worry was losing part of their income, such as through reduced hours — with one-third concerned about this,” the report stated.
Coresight Research found that just less than 7 percent of respondents “think the severe impact will last less than a month, with most thinking it will last one to four months, while over one in five think the severe disruption will last five months or more.”