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The Covid crisis is changing us.
These changes can be measured by our habits and what we spend money on. There is good and bad news. We are eating healthier. But we drink more. And some of us are upping the game. Meanwhile, regardless of what we are buying, we now do it much less using cash.
Kiwibank economists have been making a big contraction to Kiwi household spending patterns in their Kiwibank Household Spending Tracker for the September quarter. The data tracks the spending patterns of Kiwibank customers’ cards across the various Covid alert levels.
“We have acquired some good habits,” say economists.
“… Spending a lot more on fruits and vegetables. A healthy response to a health crisis.
“We have also embraced the convenience of shopping online and enjoying entertainment at your fingertips.”
But then there are those bad habits that have been creeping in …
“Spending on gambling and alcohol are among the categories experiencing a persistent upward shift,” say the economists.
The other key change in habits has been a drop in the demand for cash as people embrace PayWave and online shopping.
Economists say that the change in habits that began during the confinement now seems increasingly permanent.
“Many of us are embracing the convenience of shopping online and ordering at our favorite restaurants on a smartphone.”
They point out that in a health crisis, healthy eating is something we can control, and therefore increased spending on fresh fruits and vegetables has skyrocketed.
They say eating more fresh produce is partly a replacement for not being able to eat out.
“But even when the restaurants have reopened, we still can’t get enough vegetables. A change forever.”
However, increased spending on alcohol and gambling “looks like an unwanted hangover.”
“Fewer drinks in the pub or casino can be replaced by more around the socially distanced barbecue and a gambling app.”
In the move to less cash, economists say weekly cash withdrawals were down during the close and have not recovered.
“Hard currency is not needed as much if more purchases are made through payWave or online. But the drop in cash withdrawals cannot explain all the spike in spending that we have seen on cards.”
Economists say that people “are adaptable creatures,” and Kiwibank’s transaction data shows that Kiwis are adjusting. The Auckland blockade in August showed a pattern familiar to the initial national blockade. Spending fell, with the traditional services business being the most affected. But the general drop in spending was different from the first.
“Businesses and households have quickly learned to trade in a world with limited face-to-face contact. Many have modified their business models to accommodate social distancing and the shift to digital. We are getting better at living with alert levels.” .
Worries ahead
Economists say the tourism sector had a good winter, but there are concerns about the summer season.
“We are wary of the damage done. The drawbridge to New Zealand will not be disappointed anytime soon. Increased domestic tourism is going somehow. But foreign tourism is a difficult void to fill, especially during the summer. Divert to Kiwis going abroad, the slopes of Queenstown were worked in the weaker winter period. But the locals cannot compensate for the waves of foreign tourism that are normally seen during the summer months. “
Furthermore, economists believe that the strength of spending may decline as job losses increase.
“The unemployment rate is expected to rise in the coming months. Businesses have failed, and more may fail. The wage subsidy has supported many businesses and households. But that lifeline is coming to an end. More job losses are expected. Consumer confidence could decline (more), with more moderate spending. As a result, the pace of our economic recovery could slow down. “
And they say that not all companies will survive.
‘More necessary’
“Defaults to date have been surprisingly low. Government and central bank support has helped many companies stay open and afloat. Kiwis are resilient people. But the short-term outlook may deteriorate before improving. Activity business investment is understandably weak given uncertainty. More is needed, especially from the government, to stimulate activity. The good news is they can deliver. The Covid Response and Recovery fund still looks pretty strong. “
With Auckland climbing back to alert level 1 early Thursday morning, economists say they expect “another rebound” in spending.
“However, the end of the wage subsidy scheme will affect the strength of the rebound. Unemployment is expected to rise. Consumer confidence could decline, with more moderate spending and investment.”
“The decline in personal income in American households and the slowdown in consumption growth is something to watch out for in New Zealand. Time will tell,” they say.
