How will COVID-19 affect consumer spending?
Consumer spending numbers for January came out Friday, a mere 0.2% bump in January. That’s the month when the coronavirus headlines started coming. Incomes did jump upward, however — 0.6%, the biggest gain in nearly a year.
Consumers have been responsible for a lot of the recent economic growth. But now we’re dealing with a global health concern.
Consumer spending makes up about 70% of the U.S. economy, so any disruption would have dire effects on growth. But Jack Kleinhenz, chief economist at the National Retail Federation, says consumers are still in a good place right now.
He said Americans are saving at almost 8%, up from about 6% in 2009. And when people save, they also may be spending.
“Their income has exceeded their consumption in the last few quarters, which leaves a net benefit of saving,” Kleinhenz said. He added that low interest rates are also driving people to buy homes and refinance their mortgages.
But January’s report may not reflect consumer spending in the wake of COVID-19 which, said Matthew Luzzetti, chief U.S. economist at Deutsche Bank, is the real wild card right now.
“With a pretty resilient labor market, you would think that the consumer outlook remains sturdy, except for these worries about the impact of the coronavirus,” Luzzetti said.
He said spending on things like eating out, concerts, live sporting events and other entertainment could be the first to suffer — even without a broad outbreak in the United States.
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