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BUSINESS Thursday 11 June 2020
U.S. consumer spending sinks by record 13.6% in face of virus

in a significant way. Data
from Chase Bank credit
and debit cards shows that
consumers have slowly
increased their spend-
ing since the government
distributed $1,200 stimulus
checks in mid-April.
But most of that increase
has occurred in online
shopping. Spending in
regular brick and mortar
stores, which makes up the
vast majority of consumer
spending, is still down 35%
from a year ago, accord-
ing to Chase, after having
plummeted 50% at its low-
est point.q

A woman walks into a closing Gordmans store, Thursday, May 28, 2020, in St. Charles, Mo.
Associated Press
By MARTIN CRUTSINGER consumer spending across Daco suggested that "more unemployment aid states
AP Economics Writer the board — from durable frugal consumer behavior are providing to laid-off
WASHINGTON (AP) — goods like cars to non-du- ... will dampen the recov- workers, the federal gov-
U.S. consumer spending rable items such as cloth- ery." "This is particularly true ernment is providing $600 a
plunged by a record- ing to services ranging from as the social benefits will week in additional benefits.
shattering 13.6% in April as doctor visits to haircuts. gradually erode over time, A debate in Congress over
the viral pandemic shut- Spending tumbled 17.3% leaving households more whether to extend the $600
tered businesses, forced for durable goods, 16.2% financially constrained," he a week in federal unem-
millions of layoffs and sent for non-durables and 12.2% said. Friday's report showed ployment aid looks sure to
the economy into a deep for services. that an inflation gauge pre- intensify, with the number
recession. Last month's "The economics of fear and ferred by the Federal Re- of people receiving that
spending decline was far sudden stops were appar- serve fell 0.5% after a 0.2% aid now topping 30 million
worse than the revised 6.9% ent in April as fearful and drop in March. Fed officials — one in five workers. The
drop in March, which itself locked-down households have cited the absence of money is set to expire July
had set a record for the cut back on spending," inflation pressures as one 31. Yet with the unemploy-
steepest one-month fall in Gregory Daco, chief econ- reason they can be ag- ment rate widely expected
records dating to 1959. Fri- omist at Oxford Economics, gressive in supporting the to still be in the mid-teens
day's Commerce Depart- said in a research note. economy by cutting their by then, lawmakers will
ment figures reinforced The depth of the spending benchmark interest rate face pressure to compro-
evidence that the econo- drop is particularly dam- to near zero and pumping mise on some form of re-
my is gripped by the worst aging because consumer billions of dollars into credit newed benefits.
downturn in decades, with spending is the primary markets to keep them flow- The Trump administration
consumers unable or too driver of the economy, ac- ing smoothly. asserts that the econo-
anxious to spend much. counting for about 70% In April, the nation's jobless my will begin to regain its
Even with employers cut- of economic activity. Last rate was 14.7%, the high- health in the second half
ting millions of jobs, though, month's figure signaled est since the Great Depres- of the year, with businesses
incomes soared 10.5% in that the April-June quarter sion, and many economists increasingly reopening and
April, reflecting billions of will be especially grim, with think it will top 20% for May. restoring jobs and con-
dollars in government pay- the economy thought to States are gradually re- sumers increasing spend-
ments in the form of unem- be shrinking at an annual starting their economies ing. Most economists say,
ployment aid and stimulus rate near 40%. That would by letting some businesses though, that the lingering
checks. Wages and sala- be, by far, the worst quar- reopen with certain restric- effects of the job losses and
ries, normally the key com- terly contraction on record. tions, and some laid-off likely business bankruptcies
ponent of overall income, With spending plunging employees are being re- will take longer to over-
sank by an annualized $740 and incomes surging on called to work. Still, the job come, especially if a sec-
billion in April. By contrast, the strength of govern- market remains severely ond wave of the coronavi-
income in the form of gov- ment support payments, depressed, and the outlook rus erupts. Analysts gener-
ernment support jumped Americans' personal sav- for the rest of the year is still ally believe the economy
by an annualized $3 tril- ings rate hit a record high bleak. Some financial sup- won't manage to sustain a
lion. That form of income, of 33% of after-tax income port for the tens of millions solid recovery until a vac-
though, will likely fade in in April. Economists said this of consumers who have cine is widely available.
coming months as certain underscored how anxiety been laid off over the past And until Americans resume
government aid programs and uncertainty about the two months is coming from spending at something
expire. Friday's report economy are making con- the weekly unemployment close to their previous lev-
showed sharp declines in sumers reluctant to spend. benefits. Besides whatever els, jobs won't likely return