U.S. retail sales plunged a record 16.4 percent in April to account for the single greatest two-month spending decline on record. As states across the country begin to reopen, however, retailers and analysts have been hoping to see a return to pre-pandemic spending levels as Americans venture outside for the first time in months.
But that turnaround might not come so easily. Like virtually every other facet of American life, consumer purchasing behaviors—as witnessed in the boom in online shopping, as well as curbside restaurant pickup—have been significantly disrupted by the COVID-19 pandemic. With more than 36 million currently unemployed and millions more expressing trepidation regarding the stability of their current jobs as well as a general lack of confidence in the economy, Americans seem cautious about spending whatever savings or disposable income they have.
Several recent forecasts now suggest that many consumers plan to maintain their COVID spending behaviors even after the pandemic is over, leaving the retail sector in continued uncertainty and further impeding the chances of a speedy recovery for the U.S. economy. The fact is, it matters little if businesses are back if there’s no demand.
A Harris Poll survey conducted in April found that 79 percent of respondents said they’ll likely continue to spend less and save more once the coronavirus outbreak ends, and more than two-thirds (68 percent) said they’ll continue to avoid nonessential travel.
An April USA Today/Ipsos poll found that COVID-19 had influenced more than a third (35 percent) of respondents to cut back on spending or delaying an important purchase.
Only 17.8 percent of Americans said they currently plan to get a haircut or go to a restaurant when the lockdown in their area is lifted, according to a May survey by San Francisco-based tech PR firm Bospar.
So, what are Americans doing with their money? Recent reports suggest they’re saving it. The federal government’s Bureau of Economic Analysis in late April reported that the personal savings rate in the U.S. climbed to 13.1 percent in March, totaling $2.17 trillion in personal savings. This accounts for the highest savings rate since November 1981.
This behavior was reflected in the USA Today/Ipsos poll, which found that COVID-19 had influenced 12 percent of respondents to start an emergency savings fund.
Meanwhile, the BEA reported that personal income decreased two percent (or $382.1 billion), disposable personal income decreased two percent (or $334.6 billion) and personal consumption expenditures decreased 7.5 percent (or $334.6 billion) during the same period.
These figures further suggest that increased job instability and household income declines are influencing many Americans to hoard their money, a development that bodes poorly for an economy whose growth depends on consumer spending.
According to an April survey released by the Federal Reserve Bank of New York’s Center for Microeconomic Data, the mean perceived probability of losing one’s job within the next year now stands at 21 percent, the highest percentage ever recorded in the NY Fed’s survey since its inception in 2013.
Meanwhile, the perceived probability of voluntarily leaving one’s job within the next 12 months, the probability of finding a job within the next three months and household income growth, as well as household spending growth all, fell to record-breaking lows.
“The data is depressing,” said Curtis Sparrer, principal of Bospar. “We predict that consumer spending will continue its slump. What we’re particularly concerned about is the concept of a ‘second wave’ of infections when more states open up. That said, we are hopeful about the news Moderna is developing a vaccine to protect people against COVID-19. While our research shows a third of Americans won’t take such a vaccine when it’s available, I can promise that I will be one of the first in line when a vaccine becomes available to the public.”