Which sectors have benefitted the most from pent-up demand?
Analyzing of consumption growth since May 2021, when the last state of emergency ended, we can see that the recovery in spending on transport, and especially on leisure, hospitality and tourism, was particularly strong. The sectors hardest hit by the restrictions (most of them still in force in Q1 2021) are therefore the ones that are recovering the most. On the other hand, consumer durables (furniture, textiles, etc.) have benefitted much more modestly from the pick-up in consumption, as will be seen below, while spending on basic necessities has fallen (except among low-income households), partly because these goods can be replaced by the services offered by the hospitality industry.
Based on the analysis of consumption growth since May 2021,22 when the last state of emergency ended, we can see that the recovery in spending on transport, and especially on leisure, catering and tourism, was particularly strong. The sectors hardest hit by the restrictions (most of them still in force in Q1 2021) are therefore the ones that are recovering the most.23 On the other hand, durable goods (furniture, textiles, etc.) have benefitted much more modestly from the pick-up in consumption, as will be seen below, while spending on basic necessities has fallen (except among low-income households), partly because these goods can be replaced by the services offered by the catering industry.
- 22. In particular, data on payments with cards issued by CaixaBank at CaixaBank point-of-sale (POS) terminals.
- 23. Part of this recovery can be explained by a base effect as consumption in these sectors was depressed during the first part of the year. However, the high growth rates compared with the pre-pandemic period between May and September reinforce the hypothesis that it has been in these sectors where most of the pent-up demand has materialised. For more information, see the CaixaBank Research consumption tracker.
Recovery of consumption by income group since the end of the state of emergency
Recovery in consumption by age since the end of the state of emergency
Another interesting aspect is that, in most sectors, consumption has picked up more readily among the lower income groups, presumably because they had already released all their pent-up demand in 2021. In terms of consumer age, the patterns are very similar. However, the substitution of staples for leisure and catering services has been greater among seniors. This group has registered the highest growth rates in the staple goods sector since the outbreak of the pandemic, so it is plausible that, once they feel safer thanks to the advances made in the vaccination campaign, they have replaced part of this expenditure with spending on catering.
The recovery in spending on durable goods has been more contained24 in the different sub-sectors that can be captured via CaixaBank’s internal data. This is mainly due to the fact that the reduction suffered during the most critical phases of the pandemic was less than in other sectors, thanks to its great capacity to adapt to online sales, a channel currently enjoying remarkable growth rates that look like continuing, cushioning the fall in in person sales. Consequently, although durable goods sales are picking up, their recovery has not been as strong as in other sectors.
- 24. In fact, the recovery is somewhat smaller than shown in this article, as it includes spending in the automotive sector, one of the areas most affected by the current supply bottlenecks.
Recovery in consumption of consumer durables since the end of the state of emergency
Spending on consumer durables by sales channel
A second factor has to do with supply chains and production capacity. The fact that most of the fall in consumption during the pandemic can be explained by the imposition of restrictions meant that demand has recovered much faster compared to previous crises (indeed, consumption levels in all categories of goods already exceeded 2019 levels in 2021). In many sectors, however, supply has not been able to recover as quickly.
This mismatch between supply and demand has put enormous strain on supply chains, especially in maritime transport. This situation has particularly affected the durable goods sector, where the final product is often the result of a long production chain. The price for sending a container ship has soared in the past few months, reaching levels not seen in recent years, causing many companies to be left without the supplies they need to maintain their level of production.
Euro area: the Baltic Exchange Dry Index (BDI)* and bottlenecks in manufacturing
Finally, another aspect to take into account which is also related to the mismatch between supply and demand brings us to China, the world’s factory. The new guidelines set by Beijing in terms of containing energy consumption to keep prices in line and meet environmental targets have led to a significant number of companies being forced to reduce or even stop production for a few days. Together with the aforementioned tension in supply chains, both issues may pose a downside risk to the durable goods market.