Unprecedented adverse shock to the Global Economy
COVID -19 changes consumer’s spending pattern & behaviour in Canada
The spending pattern, capacity and the behavior of the consumers has drastically changed due to COVID-19. The lockdown and uncertainty has forced the people across the globe to redefine the spending pattern. The economic shutdown has resulted in a drop in jobs and confidence to a great extent. Several stores have been closed and the services have either been reduced at many places or are not available. The Voice of Canada takes an overall view of spending patterns and behaviour after deep analysis in Canada and the impact on the economy due to COVID-19. How & when the consumer’s spending pattern will change and revive the economy?
General tendency ‘spend less save more
The COVID-19 has absolutely changed the spending pattern of Canadians. The consumers are spending less, their habits and behaviour has also changed. Even now people are buying in excess, necessities like food, cleaning products and personal care products. Luxury buying is nowhere in the minds of the people for the time being. Spending money on items like cars and clothing have come down. Spending on entertainment and travel and other services are also not on their priority list. The major thrust is on items of daily use. Canadians feel that ‘what is spent less’ during the crisis is directly proportion or equal to ‘what is saved.’
While analyzing the pattern and behavior of Canadian households, it wasseen that during the lockdown period or containment period the priority remained on necessities only. But slowly the reopening of the economy in the early stage will definitely give an idea or an insight into the performance of the economy in the future. How will it take the shape and ultimately impact on the consumers? The experts are of the firm opinion that once the economy is revived it will change the pattern of Canadians.
Changes in Demand & Supply
The COVID-19 Pandemic in Canada in mid-March has brought changes in both supply and demand. If we talk about the supply side there were restrictions on goods, people were stuck in homes. Transportation services affected due to widespread cases. This led to a change in the buying capacities of Canadians. The demand side suffered due to economic lockdown as the household income and confidence both shown a continuous decline. This demand and supply affected lowered consumption during the containment period. This changed the Canadian spending pattern.
Shifting trends in spending
The containment period and prolonged ‘Stay Home’ dictum led to a considerable fall in consumption. The loss of jobs and reduction of working hours per week the Canadians had to pull the strings of pocket & the wallet and the spending done for household necessities only. This changed spending habits significantly. It was observed that spending and consumption patterns during shutdown saw a boom in the demand for necessities. The households in Canada stocked up food, personal care products and even alcohol and other hand hygiene products like sanitizers and floor cleaning items.
According to the Canadian Survey of Consumer Expectations (CSCE) over 50% of the respondents reported that their current spending was lower than before the outbreak struck. The initial plans for buying a car or house or even renovation of the house were kept on hold and the majority of people either delayed these projects or completely abandoned the purchase because of changed priorities.
Expenditure on Housing Market
The pandemic impact has significantly affected the Housing market. The market activity picked up before the pandemic outbreak after slowing in 2018 in response to higher interest rates, macro-prudential stress-test measures designed to keep financial vulnerabilities in check and regional changes to housing regulations. There was a sharp drop in buying houses because of the forces of demand & supply. So far as the supply was concerned, the buying & selling of houses became difficult because of social distancing measures imposed by the Government of Canada. So far as the demand was concerned with a decline in employment, loss of jobs resulted in less income and the Canadians were unable to spend on houses. Honestly, these factors led to the closure of the resale of housing markets. The sales of the housing market witnessed a downward trend throughout Canada. These negative activities in the housing market were more prominent in the provinces of Quebec, Ontario and British Columbia. The pattern indicated that due to containment measures the construction for new homes suffered severely. Whereas in the other provinces, only those projects continued which were underway and were near completion.
While housing market resales and new residential construction activity almost came to a halt in some provinces during the containment period, the recent data indicates a partial bounce back due to the easing of containment measures, improved confidence and lower mortgage rates.
It was noticed that the ratio of sales to new listings in expensive areas in Ontario and British Columbia had registered low response and the prices of higher-end homes declined. It was also observed that the ratio of sales to new listings in Newfoundland and Labrador, British Columbia and Quebec also declined considerably. The experts in Real Estate business in Canada expect softer price growth in most markets in the coming months.
Partial bounceback and reopening of Economy
One can visualize that with some relaxation after the containment, the economy is slowly opening up. Most likely in the coming months, employment may take a positive turn and spending may show an upward trend. The consumers’ confidence has started rebuilding with the increased income in hand. This will help the Canadians to complete the delayed projects. Housing re-sales may pick up soon.
