Coronavirus Dispirits Consumers: More Pandemic Doom Ahead?

Sumit Singh

The rapidly spreading coronavirus has claimed innumerable lives, rattled the stock market and almost disrupted economic activities worldwide. The outbreak has wreaked havoc on industries like Auto, Pharma, Electronics, Tourism & Aviation, Technology, Restaurants, Cosmetics and Apparel. These dampened consumer sentiment, which spiraled down to the lowest level since October 2016.

According to data from the University of Michigan, consumer sentiment index dropped to 89.1 in March from 101 in February. Market pundits predict a steeper fall next month, if the spread of virus is not contained that has already taken a toll on employment and household income. A record 3.3 million Americans have filed for unemployment benefits in the week ending Mar 21, signaling at a sharp spike in unemployment levels.

Drop in sentiment and rising job losses are surely to hurt consumer spending activity, one of the pivotal factors driving the economy. We saw that U.S. retail sales for the month of February witnessed the biggest drop since December 2018. Industry experts are apprehending more pain ahead as businesses remain closed and Americans are restricting their purchases to essential items and avoiding public places like restaurants, theatres and malls.

Certainly, these raise concern about the U.S. economy sinking into recession, with policy makers frantically working toward urgent repairs. In a bold move, the Federal Reserve announced a massive quantitative easing program and slashed the benchmark interest rate to a range of 0-0.25% from a range of 1-1.25%. Very recently, President Trump signed a $2.2-trillion stimulus package aimed at helping workers, small industries and distressed companies on the brink of bankruptcy.

COVID-19 has crippled the global economy without a doubt. The retail sector, in particular, has been dealt a massive blow by major supply-chain bottlenecks, reduced traffic, an increasing number of store closures and limited hours of working. This will not only hurt sales and productivity but will also likely to escalate these companies’ cost burden as many retailers plan to continue to give full payments and benefits to employees during this phase of temporary closure. To name a few, Foot Locker FL, Bed Bath & Beyond BBBY and Tapestry TPR have announced store closure plan for the time being.

The devastating impact of the virus has dented demand for several commodities. However, the demand for toilet paper, disinfectants, masks, gloves, packaged water, medicines and related food staples is on the rise. Per media reports, Walmart WMT, Target TGT and Costco COST are witnessing huge footfall. Also, e-commerce bellwether Amazon AMZN is registering bulk orders, mainly of food and hygienic items, as more people are choosing to stay at home amid the outbreak. Moreover, online grocery apps like Instacart and Shipt are witnessing record downloads.

All in All

The global financial markets are going through a rough patch owing to the coronavirus-induced crisis, which has severely dented investor confidence. As complete isolation is the sole way of curbing the spread of the contagion, governments are imposing strict lockdowns and curfews that are deterring multiple economic ventures. In view of this, economists anticipate “a short but steep recession” in the United States.

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Click to get this free report Target Corporation (TGT) : Free Stock Analysis Report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Walmart Inc. (WMT) : Free Stock Analysis Report Bed Bath & Beyond Inc. (BBBY) : Free Stock Analysis Report Costco Wholesale Corporation (COST) : Free Stock Analysis Report Foot Locker, Inc. (FL) : Free Stock Analysis Report Tapestry, Inc. (TPR) : Free Stock Analysis Report To read this article on Zacks.com click here.