While we wait another two weeks to get the official report on the state of US consumer spending, let’s recall that the March number was abysmal, posting a record 8.2% sequential drop as a result of state closures in the second half of the month.
And while we previously pointed out that subsequent spending had continued to deteriorate, there is some good news in that the credit and debit card data as compiled by Bank of America through April 23, continued to point to stabilization in consumer spending.
Going over the data, BofA notes that there continued to be a growing bifurcation in spending, with online activity continuing to dominate.
What was behind the tentative April spending stabilization? According to BofA chief economist Michelle Meyer, the key variable was the distribution of the CARES stimulus payments on April 15th – which totaled over $150bn according to the Treasury Department, and which helped boost spending in the middle of the month (as the table below shows, there was some noise in the data over the past two weeks due to the timing of Easter this year vs. last).
As a result, BofA observed a shift higher in aggregated spending for the 5 days following the stimulus payment among the population that received the stimulus. However, after the 5-day period, aggregated spending for those who received the stimulus payment converged to the trend of those who did not. “This shows a relatively transitory boost to spending from the stimulus” according to Meyer.
As expected, the stimulus disproportionately supported spending among the lower income cohort. BofA dug deeper into the composition of spending for this population relative to the other income groups and found a meaningful difference in spending by income group at restaurants and for online electronics where the recovery in spending for lower income households has been stronger than for the higher income ones. In contrast, spending for groceries has been comparable across income groups.
Bottom line: The good news is that consumer spending has stabilized, but mostly thanks to one-time stimulus checks. The bad news is that spending remains at low levels, and in BofA’s view a sustained improvement is unlikely until there is a recovery in the labor market, which as we will show in a follow up post may not happen until 2022.
With that in mind, here is what – and how – Americans spent money on in the time of the coronavirus self quarantines.
As expected, the biggest winner remains Amazon thanks to the ongoing surge in online spending.
While online is the big winner, travel and entertainment spending is by far the biggest loser, collapsing to near zero.
Discretionary spending is not far behind, with restaurant, transportation and clothing spending failing to rebound, although there has been an odd ramp in furniture store spending:
At the same time, spending at grocery, general merchandise and health stores is generally unchanged from a year earlier, although following a burst of spending in mid-March when Americans rushed out to hoard perishables, there appears to be a modest decline in spending in subsequent weeks as one would expect.
Finally, looking at spending my metro area shows a rebound in late April spending compared to the middle of the month across the country, although a wide dispersion remains with coastal cities such as Miami, New York, Boston, Seattle and San Fran hit the hardest, while landlocked, and less densely populated areas such as Phoenix, Dallas and Houston will likely be the first to emerge back to normal.