The one-two punch of the raging coronavirus and the lack of a new round of government stimulus is starting to take a major toll on consumer spending.
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Spending by consumers receiving unemployment benefits has fallen to its pre-pandemic spending level following the expiration of the $300 supplemental bonus in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, points out Goldman Sachs strategist Jan Hatzius in a new chart (below). The chart shows (red line) a steady decline in spending in recent months as the unemployed likely work through their savings and stay concerned about income prospects amidst the pandemic.
Conversely, spending by those gainfully employed has held up relatively well since the summer (blue line). But the ongoing pandemic and elevated unemployment may be weighing on the minds of the employed as well — this group hasn’t spent at the same pace as during the summer months.
Whether consumers receive badly needed stimulus soon remains up in the air.
Congressional leaders on Wednesday neared a new stimulus plan with a reported price target of $900 billion. The specifics on the plan are unclear. But some provisions likely to be in the bill appear to be taking shape.
The New York Times reports households in need would receive $600 to $700 in direct stimulus checks. The unemployment bonus would return but around $300 as opposed to the $600 in the CARES Act.
As lawmakers jockey to save their own gigs, the lack of stimulus is beginning to appear all over the place.
The Commerce Department reported on Wednesday that November retail sales fell 1.1%, worse than economist projections. Sales weakened in key categories such as autos, electronic stores, clothing stores and restaurants. Sales in October were revised to a decline of 0.1% from a previously reported 0.3% increase.
This follows softening in the latest reads on consumer confidence and manufacturing.
“Elevated savings & steady employment for median- to high-income families should translate into consumer spending mini-boom in mid-2021. However, many families could emerge with deep scars and an inability to spend,” warned widely followed Oxford Economics Chief U.S. economist Greg Daco in a new tweet.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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