Record job losses along with concerns about future employment pushed Americans into savings mode this spring. Consumer spending declined by 13.6% yearly in April, according to figures released by the Commerce Department on Friday. This marks the largest decline since the government began tracking data in 1959. Last month’s data was revised from a 7.6% annual decline to 6.9% year over year. Credit card debt fell by 31% annually in March, the most recent data available.
Wages and salaries fell by 8% last month, but household income gained 10.5% since last April, thanks to the coronavirus stimulus program. Personal savings grew by 33% annually in April, up from 12.7% in March. In April, the CARES Act provided for relief payments of $1,200 to most adults. Personal income growth in March was revised down to a 2.2% year over year contraction from the original 2.0% fall.
Some sectors of the economy are turning around, but the general consensus is that this recovery is going to be long and slow. A JP Morgan report released this week found that states reopening is not sufficient to kickstart the economy again. Although the study found that credit and debit card use has rebounded by about 50%, consumers are still cautious about restarting their lives while the unemployment situation remains tenuous and threats of a second wave of coronavirus linger.
Big box stores and home improvement are both faring well, but restaurants, travel, and entertainment are still ‘deeply depressed’, the analysis finds. ‘Card not present’ shopping (aka e-commerce) is faring better than in person store visits. This bodes well for companies such as Shopify, who reported ‘Black Friday’ levels of sales in April. The fates of small local businesses remain less certain.