Indulgences Are Out, Durables Are In for Virus-Scarred Shoppers
(Bloomberg Businessweek) -- The renewed coronavirus outbreaks in China and South Korea threaten to put the countries back into a soft lockdown. But East Asia did have a few months of calm. Bars and restaurants were open, as were gyms. The experience of these early movers may give us some clues on where the pent-up demand is in the U.S. So what were those lucky Asians spending their money on?
The first thing the Chinese did was take out insurance policies against their central bank’s printing money and stoking inflation—they bought apartments, long seen as a store of value. In May home sales quickly reversed April’s decline, with prices in first-tier megacities jumping 8.6% from a year ago. North Asians seem to favor durable goods. From China to South Korea, car sales staged a sharp V-shaped rebound. People were also spending money on home improvement, with furniture sales back up in China.
Meanwhile, demand for pure consumption goods, such as clothing, remained sluggish in China as well as South Korea. The tilt toward durables makes sense, because consumers still feel fragile. Taiwan never went into a lock-down, yet its consumer confidence index continued to nose-dive in May, to 64.9 from a January high of 85.3, data provided by the Research Center for Taiwan Economic Development show. June data may be worse, as the recent flare-ups knocked out any hope of a travel boom.
So welcome to the new normal. Trillions of dollars unleashed by central banks, plus bruised consumer sentiment, turn us all into investors and savers. Restaurants may fill up again, but we won’t be ordering lobsters anytime soon.
With consumer confidence low, shoppers shunned consumables and favored items that could be seen as investments, such as apartments, furniture, and cars.
● Easy Money
The People’s Bank of China flooded the economy with money. In May its benchmark rate fell to as low as 1.3% from 3% at the beginning of the year.
● Slow Sales
South Korea department-store sales fell 5% to 7% in May, estimates Nomura Securities Co. That’s an improvement—sales plunged almost 40.3% in March and 14.8% in April.
Ren is a columnist for Bloomberg Opinion.
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