Continued Lockdowns Wear on Consumer Optimism

We came across some interesting consumer survey data compiled by the consulting firm McKinsey & Company. McKinsey has been surveying consumers in some 29 markets including the U.S., the U.K., Sweden, Italy, and India.

Let’s consider the data coming out of the U.S. The most recent consumer survey from McKinsey ran from April 13 to 19. The first wave ran from March 16 to 17.

In the first wave, 44 percent of U.S. respondents said they were optimistic that “the economy will rebound within two to three months and grow just as strong or stronger than before COVID-19.”

In the April wave, that number fell to 35 percent. Five points moved from “optimistic” to “not sure.” Three points moved to “pessimistic”. These results probably reflect the rolling lockdown that the U.S. experienced as states chose their own timelines and applied their own restrictions. 

Sunny GenZs vs Gloomy Boomers

Interesting nuances emerge from a generational breakdown of the data (see chart). Gen Zs at 47 percent are 18 percentage points more optimistic than Baby Boomers at just 29 percent. This makes sense given Boomers are more likely to be concerned about the implications for their pending retirement years. Gen Zs, mostly in their late teens or early 20s, on the other hand, are looking to define their economic future. 

Consider the largest buying group among the generations, those 30-something Millenials. They are well into their peak family development years. Even as they face marriages, children, home purchases, Millenials are also more optimistic at 42 percent than the gloomy Boomers at 29 percent. This is a good sign that we should (cautiously) anticipate a buying surge once the most onerous restrictions are removed.

DIY Turns into CAC (Call a Contractor)

When asked how they planned to change their time allocation, all respondents indicated there was a 23 point net increase in those saying they would do “home improvement” projects. This was even higher among Millenials at 30 points.

We all know what happens when homeowners pursue DIY projects. Many will be in the end call a professional to repair or finish many of those projects.

That Boomers being the most pessimistic is again not surprising since, in addition to their retirement concerns, they are as a group the most likely to be severely infected with COVID-19. 

The United States, India Win on Optimism

In terms of a country to country comparison, when we looked at the U.S., the U.K., Sweden, Italy, and India, we see some dramatic differences. Among these five countries, India is most optimistic at 58 percent. Italy was the gloomiest 10 percent.

Of these five countries, only the U.S. and India are net plus optimistic, 19 points, and 46 points, respectively (see chart below). We find the optimism for India to be odd given the physical nature of the country. In cities like Mumbai and Delhi with populations of nearly 20 million each, we’d expect widespread outbreaks of COVID-19, given the tight quarters much of the 40 million live with day-to-day. 

India’s SMBs Expect to (Barely) Hang On

As we were writing this post, we came across data from Quartz related to the situation for SMBs (SMEs) in India. In a survey conducted by LocalCircles, a community-based engagement platform, almost 14,000 small businesses shared their perspective on the coronavirus situation. The survey was conducted between April 18 and 23.

The data suggests that nearly 80 percent of SMEs will either scale back, shut down, or sell their business. More than 60 percent expect to scale back. The survey failed to offer more granularity on the depth of the cutbacks. On the bright side, just 13 percent expected to shut down completely. Another 13 percent expecting growth in the coming months. 

Yet when asked about cash reserves to weather the crisis, 27 percent of the respondents indicated they were out of funds and another 20 percent said they’d be out of cash within a month. Combined that is 47 percent who would likely be out of business by the end of May. This is well more than the 13 percent who said they expected to shut down amid the crisis. This reveals a silver lining of optimism in the giant storm cloud brewing in India’s SMB market. Further on the bright side, almost 30 percent indicated they had more than three months of cash available to continue their operations. 

Perhaps optimism is a cultural norm that affords Indian consumers and business owners their glass-half-full perspective. More power to them. Pessimists take us into downturns. Optimists bring us out. 

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