Moody’s: Europe’s coronavirus lockdowns cut consumption by a third

The coronavirus lockdown has stopped or postponed around a third of typical average household consumption within the European Union (Aaa stable), creating a contingent consumption deficit that will weaken EU countries’ GDP performance, Moody’s Investors Service said in a report today.

Overall, a drop of a third in EU household consumption would represent around 20% of GDP, on an annualised basis, if lockdowns were to last for 12 months. A shorter lockdown would only impact a proportional fraction of this amount.

“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,” said Ruosha Li, a Moody’s Analyst and the report’s co-author.

The longer-term impact of the lockdown and the speed of recovery in consumption will depend on the timing and conditions of the exit, and on the related evolution of consumer sentiment.

The fall in foreign demand for European tourism and reduced construction activity will add to the impact of the fall in consumption. Spain is the most exposed of the five largest European economies to the decline in international tourism.