A broader basis now underpins the recovery
Early in the recovery, spending momentum in large cities and by the affluent lagged. However, over the past year, both have started to rally, helping to put the expansion on a more sustainable footing. Since June 2021, the largest most globally-connected cities, including New York, London, Toronto, Sydney, Dublin and Auckland, have started to regain spending momentum lost during the pandemic. This welcome upturn points to a return of urban dynamism that over time can speed and sustain the recovery.
For the greater part of the past two years, consumer demand in these cities plus their peers included in our SMI index for the top 50 cities globally (“Top 50 Cities SMI”)² lagged smaller cities (“Small Cities SMI” - those with populations less than 500,000). Falling activity in large cities gave rise to concern that their decline could erode productivity and weaken economies over time. Strengthening demand as measured by the SMI points to a revival of commerce, which can help to fill now-vacant storefronts. As urban amenities lost during the pandemic return, this could attract new residents or encourage those that relocated to return.
Based on depersonalized transaction data, as many as 3 million people in these top 50 cities may have relocated to less populated areas during the pandemic, or an average of 2 percent of the cities’ pre-pandemic population between Q3-2019 and Q3-2021.
A deeper dive into the data available from the United States also gives further evidence that a more sustainable recovery has taken hold. Spending momentum of consumers living in more affluent U.S. counties³ since early 2021 has also closed gaps that opened during the pandemic.
A key contributing factor to this turn-around was the emergence of vaccines, which enabled previously-cautious affluent consumers to return to eating out in restaurants, visiting entertainment venues and shopping in person. During the Delta variant wave last summer, counties that were more vaccinated took less of a hit to consumer demand than their less-vaccinated peers, even in areas where the disease was spreading more rapidly.