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Household consumption in Europe faces one-third fall

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Impact: Spain’s tourist hotspots like Barcelona will be hit hardest. Photo: AFP via Getty Images

Impact: Spain’s tourist hotspots like Barcelona will be hit hardest. Photo: AFP via Getty Images

Impact: Spain’s tourist hotspots like Barcelona will be hit hardest. Photo: AFP via Getty Images

A third of Europe's household consumption will be lost or postponed due to lockdowns, according to a report from Moody's.

The ratings agency warned that the fall in foreign demand for European tourism and the loss in construction will add to the impact of the fall in consumption.

Spain is the most exposed among the five largest European economies to international tourism, it noted.

Moody's added that consumer behaviour might also be altered by lingering social distancing requirements.

"The impact of the coronavirus crisis may shift consumer behaviour beyond the immediate constrain of a lockdown," noted the report's author, analyst Ruosha Li.

"The need or willingness to continue to enforce some social distancing is likely to sustain the demand in digital services," the report pointed out.

"Online sales are likely to keep on progressing in the main European economies beyond the crisis, as more customers would have appreciated their convenience," it said. " This will force retailers to adapt their capabilities further and put pressure on commercial real estate."

Ms Li added that lower consumer confidence has weighed on the consumption of all goods and services, including what are typically more resilient categories.

"Across the five largest European countries, Spain, Italy and the UK have the highest share of consumption that is likely to be lost or postponed because of the coronavirus lockdown," she said.

Her report pointed out that the remaining two-thirds of household consumption is likely to be more resilient to the lockdown, however.

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"Sustained spending on necessities like food and home-related costs, including rent and utilities, provide some mitigation to the overall decline in consumption," it noted.

"In Europe, these categories represent around 40pc of private consumption. Their short-term resilience is fostered by government measures like job protection schemes, which mitigate the impact on household incomes," it added.

"Consumption in those categories may be increased as a result of the enforced period spent at home (as more meals are prepared at home, for example)," the report said.


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