How Covid-19 Changed Our Spending

There was an unusual spike in demand that began during March 2020. It signaled the beginning of the lockdown:

Spirits had the largest gain. But that was not the whole story.

Consumer Spending Changes

Our spending patterns changed during last winter’s pandemic lockdown. While panic buying subsided when we saw replenished shelves, still, some demand remained elevated. Being at home has meant more online shopping with e-commerce sales increasing from 11.8 percent to 16.1 percent during the first quarter of 2020. At the same time, online trading is way up. The day trading site Robinhood opened three million new accounts in 2020.

Meanwhile, sales of certain hygiene products were up as much as 100 percent when compared to the same time period during 2019. Similarly, cleaning wipes, aerosol disinfectant, and even dishwasher detergents had whopping sales increases. In addition, we were buying a lot more hand soaps and general kitchen cleaners.

At home, we seemed to be more health and beauty conscious as we stocked up on vitamins, supplements, and hair color. We also upped our spending on home fitness as Peloton, NordicTrack and Mirror saw more than a 100 percent uptick. Predictably, having eliminated our morning visit to Starbucks, we bought at-home coffee products. Nestlé, for example, saw the dip in its Nespresso cafes offset by Nespresso brand home goods. We also set up home offices, created outdoor gathering spaces, and acquired school desks. Furniture sales were up 36 percent during September 2020.

Compared to 2019, food delivery spending had doubled. DoorDash dominated the market:

Last but certainly not least, we cannot even compare the increase in face mask demand because it had not existed. Etsy alone said that its sellers sold 24 million face masks. Gap reported $130 million in face mask sales.

Less

Meanwhile, L’Oréal reported a plunge in make-up and fragrance sales. I guess also, since we canceled our vacation trips, sun care products had deep double digit declines. Correspondingly, our air travel halved as did demand for hotel accommodations. And finally, while we started with the surge in spirits purchases, it really was not that frothy for everyone. The Brewers Association reports that while 44 percent of the 21+ population drinks craft beer, their on-premise sales plunged.

Our Bottom Line: Demand

Economists can very simply explain the coronavirus change in demand for the consumer goods and services we did and did not mention. Among the five determinants that change a demand curve–income, substitutes, complements, utility, and number of buyers—we can cite utility. Indeed, we have had a massive shift in the usefulness of many items.

McKinsey ideally summed up our change in utility:

My sources and more: JPMorgan sometimes has handy research on consumer spending. With the most up-to-date summary, WSJ also summarized consumer demand during 2020 and McKinsey looked back and toward the future.

Elaine Schwartz

Elaine Schwartz has spent her career sharing the interesting side of economics. At the Kent Place School in Summit, NJ, she has been honored through an Endowed Chair in Economics and the History Department chairmanship. At the same time, she developed curricula and wrote several books including Understanding Our Economy (originally published by Addison Wesley as Economics Our American Economy) and Econ 101 ½ (Avon Books/Harper Collins). Elaine has also written in the Encyclopedia of New Jersey (Rutgers University Press) and was a featured teacher in the Annenberg/CPB video project “The Economics Classroom.” Beyond the classroom, she has presented Econ 101 ½ talks and led workshops for the Foundation for Teaching Economics, the National Council on Economic Education and for the Concord Coalition.