Apr 22, 2022
Industries that boomed during lockdown are reverting to pre-pandemic trajectories. The Financial Times reports that UK customers cancelled 1.5 million streaming subscriptions in the first three months of the year.
In the US, e-commerce sales and restaurant deliveries both indicate that people have abandoned their pandemic proclivities. Meanwhile, Peloton has axed its chief executive and sacked thousands of staff as it grapples with lower post-lockdown demand, and Zoom is also coming down from a profit peak.
So What?
The UK is forecast to enter a prolonged period of stagflation. Stagflation refers to slow growth in gross domestic product coupled with high inflation.
Consumer confidence is down. Spending on goods such as clothing and furnishing is still 10% below pre-pandemic levels. Most economists expect inflation to rise higher than 8% in the second quarter, following April’s increase in the energy price cap, and possibly go higher when the ceiling is revised again in October.
ONS data from the end of March, 2022 showed that 9 in 10 adults said their cost of living had increased, with about half reducing spending on non-essentials or cutting energy use at home. The fall in real wages could leave the average UK household £900 worse off this year, with the lowest earners seeing their incomes fall by as much as £1,300.
It will take more time before we have a clear handle on what the pandemic changed for good. However, reductions in disposable income, inflation increasing the costs of goods, and a very uncertain economic forecast for the next 6-12 months could all combine in consumers choosing to tighten their belts beyond pandemic behaviours, and start to cancel other non-core spending. Specifically, charity direct debits. We could be in for a rocky few years ahead.
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