Pandemic May Change European Consumers for Good, ECB Study Finds

(Bloomberg) --

The Covid-19 pandemic had such a profound impact on European consumers that it may permanently change what people spend their money on, according to a paper published by the European Central Bank. 

A substantial share of respondents in a survey among 7,500 households in the euro area’s five largest economies said they realized during the initial lockdowns of 2020 that they didn’t miss certain products or services. The main reason for reducing consumption was the infection risk, the study showed. 

“That so many households report ‘not missing’ what they cut back on during lockdown -- even after restrictions are lifted -- signals that permanent changes to consumer demand may be occurring,” researchers Alexander Hodbod, Cars Hommes, Stefanie Huber and Isabelle Salle said in the paper. 

The shift was most evident in the hospitality and services sector. For example, 23% of French households reported not missing going to the hairdresser, while in Germany, 21% said they didn’t miss eating out. 

Long-lasting changes in consumer behavior could amplify problems in the corporate sector, with some firms facing a sustained drop in revenue in the post-pandemic economy, the authors said. That could increase concerns about “zombification,” or a situation where broad fiscal support and bank lending masks deteriorating prospects of some companies, they said. 

Services such as restaurants have been the driving force of the region’s recovery over the summer as factories remain hampered by supply shortages. A steep surge in inflation recently spooked consumers, leading to a marked slowdown in momentum. 

©2021 Bloomberg L.P.