Category Archives: consumer demand

24/6/20: COVID19 Social Impact: June 2020 Ireland


Interesting insights from the CSO on some impacts of COVID19 pandemic on general population: https://www.cso.ie/en/releasesandpublications/ep/p-sic19eep/socialimpactofcovid-19surveyjune2020asnapshotofexperiencesandexpectationsinapandemic/.

The following are of significant medium and long-term concern:

  1. Health impact 1: 40.9% of all respondents to the survey report increased body weight since the start of the COVID19 restrictions, against 13.7% who report weight loss.
  2. Health impact 2: "49.0 of newly labour inactive respondents (those in employment before the onset of the COVID19 crisis and currently not working) reported an Increase in weight. This compares with 37.6% of respondents that are currently working."
  3. Health impact 3: The above health effects are most likely primarily driven by stress. For example: "Analysis of weight change by household composition found that a higher percentage of adults living in households with children reported having gained weight (47.5%) when compared with adults living alone (35.2%)." Given that households with children faced the pressure of not only own lockdown-related factors, but also the burden of caring for children and the pressures of home-schooling, changes in the health status are likely to be signifcantly driven by stress.
  4. Precautionary savings: "Of respondents that reported reduced expenditure and/or an increase in income, just over half (51.1%) said that they have/will put additional money into Savings."
  5. Workplace: Of the respondents who reported as working from home, 19.6% stated they do not have adequate work space and/or equipment. "Almost one in five (18.5%) respondents reported being Very or Extremely concerned about their employer’s ability to provide a safe work environment in the context of COVID-19."
What does this mean for business? Some thoughts:
  • We are likely to see stronger focus on health and well-being when it comes to consumers voting with their Euros in months and years to come. Smaller, natural and sustainability-focused brands are likely to have an opportunity space as long as they can maintain value proposition. 
  • The above also supports increased demand for personalisation of goods and services being supplied to consumers, a trend that will accelerate should COVID19 restrictions persist or even re-accelerate. 
  • Financial implications of COVID19 will reinforce workplace and brand effects: as consumers return to work, they will increasingly demand greater safety and more direct engagement with their employers and brands. 
  • Production processes will shift toward ensuring tighter control and quality delivery by the brands, which means that co-manufacturing and outsourcing will be less favoured by consumers than in-house production. 
  • Direct-to-Consumer channels of sales will become more important, as they provide greater assurances to consumers of quality, provenance and ESG-impacts attributes of their suppliers.
  • On investment side: organic cash flow-funded investment will become more important in years to come. This will be driven by greater preference amongst retail investors for liquidity and by the re-discovery of the need for cash-based safety buffers amongst the companies. Low cost of funding in the bonds markets and in the banking channel will also disfavour households shifting out of their precautionary savings accumulated during the pandemic.
I am sure there will be other disruptive factors at play as well. 

26/5/20: COVID19 Impact on Travel and Consumer Demand


Some dire numbers from Factset on changes in consumer preferences / sentiment through March-April 2020:

Consumer Confidence by Age



  • "According to The Conference Board, consumer confidence has weakened significantly with the overall index falling from 118.8 in March to 86.9 in April, the lowest reading since June 2014." 
  • "... older Americans (aged 55 and over) are much less optimistic than survey respondents under 55. This poses a problem as we look to economic recovery... [as] households in which the head of household is 65 years old or older represent 22% of total household expenditures in the U.S. In addition, this age group dominates spending at full-service restaurants and travel and lodging."
Things are getting worse in travel and transport sectors:

Global Air Travel

  • "According to the International Air Transport Association, global air travel was down 52.9% in March compared to a year earlier, hitting its lowest level since the Global Financial Crisis."
  • "In the U.S., jobs in air transportation fell by 27.4% in April."
  • "The four major U.S. airlines—American, Delta, United, and Southwest—are prohibited from laying off or furloughing workers until after September 30 as a condition of receiving billions in payroll assistance as part of the CARES Act. But these carriers have been asking employees to take voluntary unpaid or lower-paying leaves, reduced hours, and early retirement."
On travel sector:

Vacation Plans

  • "The April consumer confidence survey shows that just 31.9% of respondents intend to take a vacation within the next six months. This down from 54.9% in February and is the lowest reading ever in the 42-year history of this survey question."
  • "We only have monthly personal consumption data through March... In March, consumption on accommodations was down 43.3% compared to February while air transportation had dipped by 53.5%." 

24/1/16: House Prices, Local Demand and Homeownership Status


House prices bust was a major dimension of the recent Great Recession around the world. Nonetheless, contrary to all evidence, many political leaders have opted to dismiss the adverse impacts of shocks like negative equity (due to price declines and pre-crisis debt ramp ups) and wealth effects on aggregate demand (first order price effects).

An interesting study based on the U.S. data tests the aggregate impacts of house prices changes on consumption, while controlling for homeownership status (renters v owners).

Titled “House Prices, Local Demand, and Retail Prices” and co-authored by Johannes Stroebel and Joseph Vavra (CESIFO WORKING PAPER NO. 5607, NOVEMBER 2015) the study used “detailed micro data to document a causal response of local retail price to changes in house prices, with elasticities of 15%-20% across housing booms and busts. Notably, these price responses are largest in zip codes with many homeowners, and non-existent in zip codes with mostly renters.”

In other words, not only impacts of house price changes are significant, they are also bifurcated across two types of home occupiers - owners and renters, with renters exhibiting effectively no sensitivity to home prices changes in terms of their demand.

The authors “provide evidence that these retail price responses are driven by changes in markups rather than by changes in local costs. … Markups rise with house prices, particularly in high homeownership locations, because greater housing wealth reduces homeowners’ demand elasticity, and firms raise markups in response. Consistent with this explanation, shopping data confirms that house price changes have opposite effects on the price sensitivity of homeowners and renters.”

Overall, “taken together, our empirical results provide evidence of an important link between changes in household wealth, shopping behavior and firm price-setting. Positive shocks to wealth cause households to become less price-sensitive and firms respond by raising markups and prices.”

So do house prices matter for aggregate demand? They do. Does homeownership smooth or amplify effects of shocks to house prices on the aggregate economy? It appears to amplify them. Should monetary and fiscal policies be asymmetric for areas with high homeownership concentration as opposed to areas with high renters concentration? Yep. Ditto for countries, instead of areas.

Of course, in the Euro area, how does one structure differential monetary policies across countries so diverse as renters-concentrated Germany vs homeowners concentrated Holland or Ireland? Err… can we check that one as yet another problem with Euro architecture?..



29/7/15: Retail@Google: Key Trends on Consumer Demand


Google folks made their Retail@Google event publicly available via videos. Worth listening through on key trends in consumer demand and retail services. The full even pages are here:
- Day 1 https://www.youtube.com/playlist?list=PLgIN4fB7J4qWK2np5oNbfW5_HlGUcdy4t
- Day 2 https://www.youtube.com/playlist?list=PLgIN4fB7J4qV_vPmv_T9k7Vpc54b_QDdn

My own contribution to the event is here: https://www.youtube.com/watch?v=XRR4KwtIYuE. I am looking at 7 key themes of the future in consumer demand, driven by geography of growth, technology and consumer demographics.

14/5/15: The Happiest Deflationary Consumers of Ireland… April 2015 Data.


Good thing Consumer Confidence is booming in Ireland, cause otherwise we might get a wind that domestic demand for goods and services is going nowhere:


Now, how would we get such an idea. you might ask? Well, simples.com : take a look at consumer prices:

Spot the trend? That's right: CPI was down 0.7% y/y in April and down 0.6% on average over the last 3 months.

And in case you want to see what 'sustains' at least some semblance of non-totally-collapsing prices? Why here it is:

Well, the only reason we are not a complete basket case come inflationary dynamics is thanks to tobacco and alcohol (up whooping 26.5% over the pre-crisis average thanks to tax extraction by the State), and electricity and rents (pushing housing, water, electricity, gas etc up 7.1% over the pre-crisis levels - you might also call that tax extraction, for much of these increases goes to fund semi-states and quangos and soon-to-come Irish Water), Health (where much of the 'savage cuts' were just something masking the actual hikes in cost of services to those of us who pay for them), and Education (where state extraction of funds was so rampant as outpace by a factor of 10 overall inflation in the economy), and Restaurants & Hotels (where the cut in Vat did nothing to alleviate price pressures on consumers), and a bunch of state-related and regulated prices that went into Miscellaneous category.

And so just as with retail sales, deflation is now consistent with rising consumer confidence. Happiness attained, at last. Just never ask what happens to demand when prices (imported from the rest of the Euro area) start creeping up across all sectors... that is something polite Irish economy forecasters don't want to talk about...