A look at Americans favorite past-time during the pandemic
Consumer spending tells the inside story of the economy because it keeps track of something Americans love to do: shop. When you spend your hard-earned cash, you send a signal to businesses that helps them make informed decisions about hiring and investing. Think of your spending like a personal rewards card. Every purchase you make alerts the gamut of businesses you shop at about your habits. Then, researchers get involved and fancy spreadsheets are created to understand how Americans use their money. Consumer spending is one of the key components of quarterly Gross Domestic Product. It’s measured by government agencies like the Bureau of Labor Statistics and the Bureau of Economic Analysis who track money that’s spent on food, clothes, and cars. This indicator is fascinating because it’s a window into the world of people’s behaviour.
The U.S. Bureau of Economic Analysis reported that in the second quarter of 2021, consumer spending increased to $13.6 billion compared to $13.2 billion in the first quarter of 2021, which was a change of 3%. During the pandemic, consumer spending in Q3 dropped to $11 billion from $13 billion in the previous quarter. The pandemic didn’t kill all consumer spending, though, it just changed it. People were no longer spending their earnings on pricey restaurants, gym memberships or vacations. Instead, panic buying ensued. Herds of people stormed grocery stores with the belief that there would be a scarcity of the products they needed. People hoarded toilet paper, cleaning wipes, and hair coloring products. Videos posted on social media of empty store shelves and lines snaking across parking lots only helped to fuel this consumption. At times, consumer spending during COVID-19 looked a lot like your daily astrological chart because it made no sense. A report by the Mastercard Economics Institute found that e-commerce sales made up about $1 out of every $5 spent on retail globally. That’s an increase from about $1 out of every $7 spent in 2019.
Eventually, the panic buying died down and businesses scrambled to figure out what consumers would turn to next. If you were a business owner who supplied gym equipment, this was your time to shine, as people installed home gyms. Being confined to the home meant working from home as well. Long gone were the days of dressing up to go to work. Now, people wore sweats. If you had been an early investor in Aritzia or Lululemon, you would have earned a pretty penny. According to the U.S. Census Bureau, Americans spent $791.7 billion in 2020 on e-commerce products and services — an increase of 32.4% from the previous year. E-commerce also accounted for 14% of total retail sales, compared to 11% in 2019.
Consumer spending during the height of the pandemic told a story of reduced spending in recreational areas but an increase in online shopping. The pandemic provided a unique look into spending habits during a time when most were confined to their homes.
