Americans’ pandemic-fueled appetite for big-ticket items may have been sated, while the rise in Covid-19 cases around the country is hurting spending elsewhere. Another round of checks from the federal government—if it comes—can only do so much.
The Commerce Department on Wednesday reported that consumer spending slipped a seasonally adjusted 0.4% in November from a month earlier, marking its first drop since April. This was just the latest evidence that the economy is weakening as the winter approaches, setting up for a challenging period as the country awaits a full vaccine rollout.
The details of Wednesday’s report showed what the contours of the slowdown could look like. Spending on goods declined 1% last month, while spending in the far larger services sector fell a more muted 0.2%. Within goods, it was big-ticket items that registered some of the biggest drops: Spending on motor vehicles and parts fell 3.6%, while spending on major household appliances fell 1.4%.
Spending on motor vehicles and parts fell 3.6% in November.
Photo:
David Paul Morris/Bloomberg News
Those drops are notable because sales of cars and appliances had experienced some of the biggest revivals since the spring, as the pandemic spurred demand for private transportation, and homebound Americans shifted spending to improving their living quarters. Wednesday’s report suggests those trends may be played out as demand is sated.
In the services category, spending on food services—largely restaurants and bars—showed one of the biggest declines, dropping 3.6%. That is a reflection of how rising Covid cases are weighing on spending. And considering how much worse the pandemic has become since last month—there have been twice as many Covid deaths daily so far this month as in November—the slump in spending at restaurants and other pandemic-affected services businesses will only get worse in the months ahead.
In this situation, another round of checks from the government—whether it is the $600-per-person payments that many households will receive under the agreement Congress came to, or the $2000 per person that President Trump is now agitating for—might only have a limited effect on spending. With less pent-up demand for big-ticket items, and caution over Covid limiting spending in other areas, a lot of people might just let the money sit in the bank.
For Americans in difficult financial straits, however, those checks could help with necessary items, like rent and groceries. So too would the extra $300 a week in unemployment benefits, and extension of other unemployment programs in the deal Congress worked out. The relief package may not be the cure for the economy’s winter blues, but if it falls apart they will be that much worse.
Write to Justin Lahart at justin.lahart@wsj.com
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