8 Consumer spending on transportation therefore fell sharply last year (figure 4). People also avoided communal travel such as public transport, taxis, and airplanes-total ridership in public transportation fell by 50% in the first three quarters of 2020 compared to the same period a year before. PCE on recreation services fell by 31.8% last year, while spending on food services and accommodation dipped 21.8%. No wonder then, that, in 2020, the share of services in nominal PCE fell, while that of both durable and nondurable goods went up by nearly a percentage point each (figure 2).Ĭonsequently, certain forms of services spending suffered deeply. Figure 1 also reveals that goods purchases benefitted during the pandemic, while services fell sharply. And it is only in March this year that spending surpassed the prepandemic level of February 2020. The pace of decline was the harshest in April 2020 (figure 1). With all these factors weighing on consumers, PCE contracted 3.9% last year compared to a 2.4% expansion in 2019. 6 The personal savings rate ended 2020 at 14.2%, nearly double of what it was in December 2019. According to Deloitte State of the Consumer Tracker, a global survey of consumers, concern about personal well-being and that of friends and family members was the highest in April 2020 and in the last quarter of the year when new virus cases increased sharply. Savings too increased last year as even employed people held back on spending amid economic and health-related uncertainty. Real personal consumption expenditure (PCE) 5 fell in 2020 as options for spending declined and the economic impact of the pandemic cut into people’s wallets. 4Ĭonsumer spending fell sharply in 2020 due to the pandemicįear of COVID-19, social distancing measures, and outright closures enforced locally at various times in 2020 resulted in a tangible shift in the amount and nature of consumer spending. Remote and hybrid work-a mix of in-person and remote, for example-may induce permanent changes in the way Americans work, live, and spend. Yet the future of consumer spending will also depend on the nature of postpandemic life. After all, there’s a limit to the amount of gym equipment and furnishings one can buy. Spending on durable goods is, however, expected to be moderate. Services is set for a strong rebound as people travel more, attend sporting events, go out shopping like they did in 2019, and return in troves to restaurants and pubs. With it, consumer spending and the wider economy will likely get stronger. 3 It is likely that by the end of this year, the country will inch closer to what it was before the pandemic. 2 Vaccines are now available even for children aged 12 years and over. New virus cases have declined by 95% since the peak of January 8, while vaccinations have increased. This year, the despair of 2020 is giving way to hope. Instead, people stockpiled food and other essentials, and spent more on home gyms, furnishings, and utilities. Travel, transportation, and restaurant spending were suddenly out of favor. As homes turned into offices and wider economic activity slowed, consumer spending suffered, and spending patterns suddenly changed. Hitting the gym, grabbing a drink at the local pub, and hailing a cab-until then hallmarks of daily life-suddenly turned into a game of Russian roulette.

Then, in 2020, faced with a formidable and unseen biological enemy that spread across the country through touch and aerosols, people withdrew indoors. In 2019, a year before COVID-19 changed our world, consumers in the United States spent close to US$10 trillion 1 on a swathe of services.

Consumption economics