- The EU reported a rising number of coronavirus cases as it enters another wave of the pandemic.
- And the US is expected to follow suit, which may harm consumer spending and delay recovery for card issuers.
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Europe is entering a second wave of the coronavirus pandemic, with France and other countries now imposing new restrictions to control the influx of cases, per The Wall Street Journal.
To help curb the spread of the virus, a number of EU countries are implementing measures such as curfews, restrictions on social gatherings, and limited nonessential business hours. However, if the situation worsens, governments may need to enforce stricter measures—like Ireland, which just entered a six-week lockdown—which may have detrimental effects on European issuers like UK-based Barclays, which saw a 4.7% year-over-year (YoY) drop in UK consumer card spending in Q1 2020.
The US coronavirus outlook may mirror that of Europe, which would negatively impact spending. US coronavirus restrictions and recovery have varied from state to state, and many regions have lagged behind Europe in the spread of cases. This could mean that the US may face another wave in the coming weeks—which experts are also forecasting—potentially leading to store and dining closures as well as increased unemployment and declining consumer spending.
However, it's worth noting that the upcoming US election may have a hand in influencing coronavirus progression since President Donald Trump and former Vice President Joe Biden have different mitigation plans—though the former VP's plan wouldn't come into play until mid-winter if he wins the election.
Recovery for card issuers—which were just beginning to rebound from the spring—could be stifled if another wave and an ensuing round of restrictions hit.
- US issuers were hit hard during the pandemic but were beginning to recover in Q3. At the onset of the pandemic, temporary nonessential business closures and an increase in unemployment led consumers to cut spending. Issuers were directly affected as a result: Amex's global consumer billed business volume saw a 20% YoY decline in Q2 while Citi experienced a 21% YoY drop in its branded card volume. However, in recent months as coronavirus cases slowly dropped and restrictions eased up, issuers experienced a slight rebound in volume, with the Amex CEO stating that he hopes the worst is behind us.
- But the mounting risk of a second wave hitting the US during the winter months could revert growth. Consumers could limit spending to essential purchases to an even greater extent than they already have, especially among those financially affected by the pandemic. Further, dipping confidence and more restrictions could bring about an overall decline in volume, which issuers have been working to incentivize, in turn causing further declines and undoing recovery progress.
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