As COVID’s clouds appeared to lift this spring and early summer, consumers returned to restaurants, casinos and car dealerships in the first half of the year, while personal income edged higher in June.
The federal Bureau of Economic Analysis released its monthly report on personal income and expenditures on July 30.
“The effects of pandemic relief programs in March is conspicuous. Government social benefits in that month accounted for over a third of personal income,” said John Anderson, economist with the University of Arkansas System Division of Agriculture and the Dale Bumpers College of Agricultural, Food and Life Sciences. For more than a year, Anderson has tracked COVID and its economic effects.
“Throughout the pandemic, except for the final quarter of 2020 between major relief programs, government transfers have accounted for close to a quarter of personal income,” he said. “In June, the proportion of income accounted for by government transfers fell to 19 percent — higher than the 16 or 17 percent that would have been considered normal pre-pandemic, but not by much.”
He said that with government transfers falling, the slight rise in personal income in June was “largely driven by an increase in employee compensation and proprietors’ income as economic activity slowly approached normal over most of the country.”
Spending was up on services and nondurable goods but declined on durable goods for the second month in a row. The durable goods category includes items such as large appliances, electronics and furniture.
“Durable goods spending has been remarkably strong after falling sharply early in the pandemic,” Anderson said. “In 2019, durable goods spending averaged an annual rate of a bit over $1.5 trillion.”
Then came the pandemic and durable goods spending bottomed out in April 2020 at an annual rate of a little under $1.2 trillion.
However, in March 2021, durable goods spending eclipsed an annual rate of $2 trillion for the first time.
“At just over that $2 trillion annual rate, durable goods spending remains well above pre-pandemic levels but is falling back toward those levels as other categories of spending increase,” Anderson said.
Gambling on going out
Following the rollout of COVID vaccines and a general feeling that it was safe to get out, consumers headed back to restaurants and recreation venues.
Anderson said that “this May, food services spending climbed back above pre-pandemic levels for the first time. However, several of the service spending categories remain more than 20 percent below pre-pandemic levels,” including recreation services.
Recreation services does show some interesting variation within its subcategories.
“For example, spending at movie theaters is still less than 20 percent of its pre-pandemic level,” Anderson said. However, consumers have not lost their love for movies.
“The clear movie theater substitute — video streaming and rental service — has seen spending go up by more than 30 percent,” he said.
“Spending on amusement parks, campgrounds, and related recreational services remains at about half of its pre-pandemic level,” Anderson said.
“Spending at casinos, on the other hand, is currently about 5 percent higher than before the pandemic,” he said. “Apparently, gamblers are less risk averse than roller coaster enthusiasts.”
The pandemic was expected to hit public transport hard around the globe, according to an Ernst and Young survey released in November, which forecast a 69 percent reduction in use of public transportation for work, a 61 percent decrease in use for leisure and entertainment and a 53 percent decline for household and social travel.
Transportation services, including public transit, air and sea passages, was down by about 40 percent in June 2020 compared to its pre-pandemic level. Spending on travel services has recovered only about half of that loss over the past year, with June 2021 spending about 20 percent lower than before the pandemic, according to BEA.
“Spending on motor vehicles and parts reached more than 40 percent higher than its pre-pandemic level in March and April before retreating over the past couple of months,” Anderson said. Even so, “spending on recreational goods and vehicles including boats and RVs, is currently about 30 percent higher than before the pandemic.