At the moment, we need all the dopamine we can get. Perhaps, that’s why we are mashing the “buy” button so hard and so often.
A day doesn’t go by of late without another boffo shopping report beating expectations. At a frenetic pace, we are snatching up cars, homes, home improvement gear, laptops, flowers, treadmills, guns, golf clubs, and video games, to name but a few categories. Best Buy can’t keep up with gadget demand. Nintendo just posted a historic billion-dollar profit. And Target sales tripled in the recent quarter.
Congress, the Federal Reserve, and a wave of stimulus money has financed much of this spending spree. Pent-up demand is no doubt playing a part as well. When it became clear the zombie apocalypse wasn’t nigh, we suddenly needed a new deck and a Stihl chainsaw, Recession be damned.
Consumer spending rose 2% in July, according to data released Friday, its third consecutive monthly increase. Meanwhile, consumer confidence is at a six-year low, an incongruous data point that suggests there’s something deeper and weirder going on. Specifically, the entire notion of discretionary spending is in flux.
Consider how Americans typically spend their money. In 2018, large chunks of average household spending went to: transportation (16%), healthcare (8%), dining out (6%), entertainment (5%), apparel (3%) and education (2%). Those categories accounted $4 in every $10 dollars spent and while they didn’t vanish in lockdown, they likely shrunk by quite a bit. Virtually overnight, COVID put much of the world on a brutally efficient budget. In April, Americans were saving one in three of their disposable dollars and not just because hair clippers were hard to find.
We are still paying our health premiums, but probably skipping the dentist. We are buying sweatpants instead of suits, on-demand films instead of movie theater tickets. We are delaying college, canceling daycare and saving on subway fare. A day at the amusement park is now a socially-distanced hang at the beach hang or a three day puzzle-bender (don't knock it until you try it). And forget about plane tickets, concerts and Yankee games.
Indeed, inflation-measuring models are kind of useless at the moment, as is much of the conventional wisdom about how people buckle down in tight times. Consider the RV and motorcycle industries, two sectors of the economy that are typically among the most sensitive to a downturn. They are both booming, moving in the same direction as the unemployment rate for perhaps the first time since William S. Harley and Arthur Davidson started tinkering in a Milwaukee machine shop.
Any consumer-facing CEO, in short, should think deeply about the new normal in spending and try to theorize if and when their product or service could get a precious bit of COVID vitality. Drastic cuts in staffing, marketing and things that don’t seem essential at the moment — like R&D — might not be necessary. In fact, they could be ill-advised. The consumer psyche is in a weird place it's looking like it will be for some time: equal parts terrified and treat yourself.
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"low" - Google News
August 30, 2020 at 06:00PM
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If Consumer Confidence Is So Low, Why Is Spending Rising During the Pandemic? - Bloomberg
"low" - Google News
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