Consumers, worried about the economy, keep spending anyway
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It’s Black Friday, folks — a day when Americans traditionally like to spend, spend, spend. So, let’s look at consumer spending.
We got October numbers this week, and the verdict? Americans are shopping; spending climbed 1.3%, compared to 0.6% the month before.
Sentiment numbers out this week say consumers are worried about the economy. But spending numbers say consumers are opening their wallets without much worry.
“What you need to pay attention to is what consumers are buying, not what they’re saying,” said Gregory Daco, an economist at Oxford Economics. “What you need to pay attention to is what consumers are buying, not what they’re saying.”
Despite all the woes about supply chains and inflation, what they’re buying is … stuff. And lots of it. Spending on goods is above pre-pandemic levels — with a few caveats, of course.
Supply chain problems have likely given spending a temporary boost, according to Carola Binder, an economist at Haverford College.
“I think partly it’s consumers trying to do some of their holiday shopping early,” she said.
The other caveat? Inflation. If something costs more, that drives up spending.
Still, overall, spending rose more than inflation. More Americans are working again and overall household balance sheets are strong. Plus, the more permanent the pandemic has started to feel, the more permanent our pandemic spending behaviors have become.
John Leer, an economist at Morning Consult based in Washington, D.C., is still working from home and mostly eating in — which means his grocery bill is up. He also recently bought a car.
“Those are all changes in consumers’ lifestyles that have tremendous ripple effects for all of their other spending activities,” he said.
Leer thinks some of the spending might stick around as the pandemic goes on and maybe for a while after supply chain problems ease for big-ticket items people are waiting for, like couches and cars.
“Once that inventory materializes I would expect consumers to go out and start making those purchases,” he said.
All of this though is dependent on what happens with the virus as new variants continue to emerge.
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