What consumer spending can tell us about the economic recovery
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New monthly data on consumer spending is due Friday.
We often talk about retail sales numbers. Those come out monthly and tell us mainly whether people are buying goods, which they’ve done a lot of during the pandemic.
“Goods spending was very strong,” said Dana Peterson, chief economist at The Conference Board, a nonprofit research group. “People bought cars, they bought appliances. They bought lawn furniture. They bought boats and RVs.”
But the data we’re getting Friday, the consumer spending numbers, are more heavily weighted toward services, like bars, restaurants, hair salons, amusement parks and theaters. Call it the experience economy — which didn’t do so well during the pandemic.
“But as more people are vaccinated, and certainly as economies are reopening, that experiential spending will come back,” Peterson said.
Friday’s numbers will give us a sense of how much.
Peterson said she’s expecting the numbers to be very strong through the summer and probably into next year.
But it’s hard to say how long any bump in spending might last. The numbers are a snapshot in time, of March, specifically, when a lot of people were spending their stimulus checks.
“I’m going to spend differently money I saved over many years than I’m going to, say, spend a fat government check that I actually never counted on and all of a sudden — surprise,” said Ori Heffetz, who teaches macroeconomics at Cornell University.
In other words, the way people are spending right now — because they’ve got that fat stimulus check and the sun’s out and they got their vaccine and they’re feeling hopeful — that’s not necessarily going to last.
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