Welcome to the age of the hermit consumer

IN SOME ways, the Covid-19 pandemic was a blip. After soaring in 2020, unemployment across the rich world quickly dropped to pre-pandemic lows. Rich countries reattained their pre-Covid GDP levels in short order. And yet, more than two years after lockdowns were lifted, at least one change appears to be enduring: consumer habits across the rich world have shifted decisively, and perhaps permanently. Welcome to the age of the hermit.

In the years before Covid, the share of consumer spending devoted to services rose steadily upwards. As societies got richer, they demanded more in the way of luxury experiences, health care and financial planning. Then, in 2020, spending on services, from hotel stays to haircuts, collapsed owing to lockdowns. With people spending more time at home, demand for goods jumped, with a rush for computer equipment and exercise bikes.

Three years on, the share of spending devoted to services remains below its pre-Covid level. Relative to its pre-Covid trend, the decline is even sharper. Rich-world consumers are spending on the order of US$600 billion a year less on services than you might have expected in 2019.