CHICAGO –Legal cannabis sales surged to new highs in some states even as COVID-19 caused record unemployment levels and billions in lost income. Experts at Anderson Economic Group, who have tracked legal cannabis demand through the AndCan® Index since 2015, suspect this short- term spike is unlikely to last, however, as consumer behavior adjusts to the new normal of COVID-19- related restrictions and the virus’s economic damage grows.

Demand spiked as consumers stockpiled cannabis

As AEG experts previously predicted, new data shows that demand surged starting in late March as states began imposing stay-at-home orders. Between February and April, recreational sales were up nearly 20% in Colorado and 40% in Oregon. Medical sales soared as well, increasing 50% in Colorado and Michigan and 25% in Illinois and Maryland. “People were unsure if recreational cannabis dispensaries would be deemed essential businesses, so they purchased more than they typically would,” noted Brian Peterson, the firm’s director of public policy and economic analysis.

One-time factors temporarily shielded demand from the economic downturn

Cannabis demand remains strong despite the downturn, buoyed by several factors that include stimulus checks, supplemental unemployment insurance, bar and restaurant closures, and the 4/20 “holiday.” Andrew Miller, a senior analyst at Anderson Economic Group, explains that “Even as unemployment soared, federal relief programs replaced lost earnings and even put some extra money in consumers’ pockets, but bar and restaurant closures meant they had few places to spend it.” Further, Miller contends that when these factors were combined “with extra leisure time at home…it only makes sense that consumers would start using more cannabis.”

Some markets saw declines

While some states enjoyed record legal cannabis sales, others–particularly those that depend on cannabis tourism–witnessed steep declines. Nevada’s recreational cannabis sales in April were nearly 30% lower than in January. “Nevada’s cannabis market was hit hard as tourism came to a standstill,” Miller said. “Any increase in sales to state residents was clearly not enough to offset lost tourist spending.”

Economic headwinds still strong

Strong cannabis sales this past spring are unlikely to last, as the pandemic’s negative impacts continue to reverberate through the economy. Personal income fell 4.2% in May, and weekly unemployment claims remain at record levels. Federal stimulus programs that have mitigated the impact of lost income will soon expire. Unless these programs are extended, cannabis sales are likely to fall, especially as the rise in new COVID-19 cases threatens the country’s recovery.

This analysis was prepared by Anderson Economic Group economists Brian Peterson and Andrew Miller in Chicago. For more, see Anderson Economic Group’s AndCan®Index and COVID-19 press releases.