Many people prepared during the pandemic’s early days for what they forecast as a relatively short disruption to their daily lives — a few weeks or months of slowdown, followed by fast return to normal.
But that’s not how things have played out half a year on, and the majority of U.S. consumers now expect disruptions to drag on well into 2021.
As the pandemic grinds on and becomes a permanent-feeling feature of day-to-day life, U.S. consumers are changing their spending habits around it. Some are doing so out of necessity, as the pandemic has pushed millions of Americans out of work as a nasty economic side effect. Others are making changes by choice, re-centering their priorities as the crisis prompted some Americans to look at their finances differently.
But no matter what the cause, it’s pretty clear as we inch toward the holiday-shopping season that U.S. consumers have evolved into somewhat different people since the pandemic began. But exactly what they’ve evolved into remains somewhat tricky to predict a few weeks before the season kicks off.
There’s a Savings Craze, a Spending Crunch and Weak Consumer Confidence
Americans as a rule aren’t known for being the world’s most avid savers. In fact, a PYMNTS survey conducted as the pandemic began found that six in 10 U.S. consumers reported living paycheck to paycheck. Almost half also reported having less than $2,500 in savings.
But faced with the outbreak’s tremendous economic uncertainty, Americans quickly learned to be better savers. The U.S. personal savings rate hit an historic 33 percent of disposable income in April as Americans hunkered down amid COVID-19.
That trend toward belt-tightening and funneling funds into savings has carried on consistently since then. As $1,200 U.S. government stimulus payments hit consumer accounts, about a third of recipients pushed those funds directly into their savings accounts instead of spending the money (going against what the government had been hoping for).
In fact, July government data from the U.S. Bureau of Economic Analysis indicated that the personal savings rate was still at 17.8 percent, while consumption had only risen 1.9 percent across the board.
That increased savings and weak spending has been accompanied by a rather dour consumer outlook for the future and their prospects in it. The Conference Board reported that August U.S. consumer confidence had dropped for the second consecutive month.
“The Present Situation Index decreased sharply, with consumers stating that both business and employment conditions had deteriorated over the past month,” said Lynn Franco, the board’s senior director of economic indicators.
But while such signals paint a grim picture of consumer sentiment, they’re not the only signals out there.
On the Other Hand, Some Sentiment Measures Are Improving Amid Green Shoots
Consumer sentiment is difficult to pin down, particularly in a crisis where conditions on the ground can rapidly change. While The Conference Board’s latest data looked bad, two other indicators — the University of Michigan August Survey of Consumers and the latest Morning Consult data showed at least some improvement.
And some experts who spoke to MarketWatch said they didn’t trust The Conference Board’s consumer confidence decline in light of the fact that consumer spending increased as summer came to a close.
“I have to admit that I do not take this latest reading at face value,” said chief economist Stephen Stanley of Amherst Pierpont Securities, according to the report. “If you believe the number, then consumers are feeling worse in August than they were in the depths of the lockdown. I can’t imagine that anyone believes that.”
It remains an open question as to what upcoming U.S. government figures on consumer spending will look like for August, the first pandemic month that didn’t include $600 a week in extra unemployment payments.
However, data released last week by Rasmussen Reports indicate that consumer confidence has recently enjoyed a bump upward so far in September, clocking in at its highest level since the pandemic hit America in earnest in March.
Moreover, data from the Federal Reserve found some increase in consumer willingness to borrow money, with consumer credit balances rising 3.3 percent and 3.6 percent year over year in June and July, respectively. It also found an increase in the need for consumers to use credit cards to pay for daily essentials.
It’s hard to know if this is a data point or a trend. And whether that trend is a healthy consumer feeling better about spending, and particularly in time for the all-important holiday season, or a sign that consumers are feeling pinched the longer the pandemic and its uncertainties persist.
