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14 May 2020 – Insights

Consumer behaviour a big unknown in economic recovery


Governments around the world are gradually reopening their economies. But are consumers ready to follow their governments’ lead? And what about infection rates?

As governments around the world are gradually easing lockdowns and opening their economies, chief analyst at Danske Bank, Allan Von Mehren, is expecting economic activity to bounce back and he is hopeful that the recovery will be U-shaped meaning that the economy will gradually pick up preceded by a period of subdued activity.  



“We expect unemployment to rise significantly and believe companies will be reluctant to rehire all workers quickly, and it will feel like a recession for some time with global GDP unlikely to reach pre-crisis levels before 2021. But monetary stimulus, a likely vaccine or effective treatment within a year as well as increased consumer saving could lead to U-shaped recovery beginning in the second half of 2020”, says Allan Von Mehren. 

Cautious consumer behaviour
But the risks are stacking up, he says, and a major concern is infection rates spiralling out of control forcing a new lockdown of the world’s economies. 

“The effect of reopening on the coronavirus reproduction rate is uncertain and the report from Germany that it is already above 1 again is a concern. The return of new cases in China and South Korea also serves as a reminder that the virus can return very easily”, says Allan Von Mehren. 

Monetary stimulus, a likely vaccine or effective treatment within a year as well as increased consumer saving could lead to U-shaped recovery beginning in the second half of 2020

Allan Von Mehren

Chief Analyst, Danske Bank


And even if infection rates are kept low enough to allow continued reopening of the world’s economies, the big question is whether consumers feel safe to mingle with other consumers and pick up old consumer habits, and if they feel sufficiently confident to begin spending. 

“The global economy is in the midst of the worst recession since World War II. In the US, 30 million people are now unemployed, and business surveys in the US, Europe and Asian countries all point to an unprecedented fall in sentiment. In China, which was the earliest country in the virus cycle production is almost back to full capacity but demand from consumption and investments is a big challenge as high uncertainty is keeping spending levels down”, says Allan Von Mehren. 


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