FAYETTEVILLE, Ark. – As COVID 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 up in June.
The Federal Bureau of Economic Analysis published its monthly report on personal income and expenditure on July 30.
“The effects of the pandemic relief programs in March are obvious. Government social benefits in that month accounted for more than a third of personal income, ”said John Anderson, economist in the Agriculture System Division at the University of Arkansas and the Dale Bumpers College of Agricultural, Food and Life Sciences. For over a year, Anderson has been tracking COVID and its economic effects.
“Throughout the pandemic, with the exception of the last quarter of 2020 between major relief programs, government transfers have accounted for almost a quarter of personal income,” he said. “In June, the proportion of income represented by government transfers fell to 19%, more than the 16 or 17% that would have been considered normal before the pandemic, but not by much.”
He said that with the decline in government transfers, the slight increase in personal income in June was “largely due to an increase in employee compensation and homeowner incomes as economic activity slowly approached the bottom line. normal in most of the country “.
Spending increased for services and non-durable goods, but fell for durable goods for the second consecutive month. The durable goods category includes items such as major appliances, electronics and furniture.
“Durable goods spending has been remarkably strong after falling sharply at the start of the pandemic,” Anderson said. “In 2019, spending on durable goods averaged an annual rate of just over $ 1.5 trillion.”
Then came the pandemic, and spending on durable goods hit a low in April 2020 at an annual rate of just under $ 1.2 trillion.
However, in March 2021, spending on durable goods eclipsed an annual rate of $ 2 trillion for the first time.
“At just over this annual rate of $ 2 trillion, spending on durable goods remains well above pre-pandemic levels, but falls back to those levels as other categories of spending increase.” , Anderson said.
Bet on leaving
Following the rollout of COVID vaccines and the general feeling that it was safe to go out, consumers have returned to restaurants and places of recreation.
Anderson said that “in May, spending on food services rose for the first time above pre-pandemic levels. However, several of the service spending categories remain more than 20% below pre-pandemic levels, ”including recreation services.
Leisure services show some interesting variations within their subcategories.
“For example, spending at movie theaters is still below 20% of their pre-pandemic level,” Anderson said. However, consumers haven’t lost their love for movies.
“The clear substitute for cinema – the video streaming and rental service – has seen its spending increase by more than 30%,” he said.
“Spending on theme parks, campgrounds and related recreational services remains at about half of their pre-pandemic level,” Anderson said.
“Spending at casinos, on the other hand, is currently around 5% higher than before the pandemic,” he said. “Apparently gamers are less averse to risk than roller coaster enthusiasts.”
The pandemic is expected to hit public transport hard around the world, according to an Ernst and Young survey released in November, which predicted a 69% reduction in public transport use for work, a 61% decrease in public transport use for work. leisure and entertainment and a 53% decrease in domestic and social travel.
Transport services, including public transport, air and sea crossings, fell by about 40% in June 2020 from their pre-pandemic level. Spending on travel services has only recovered about half of that loss over the past year, with spending in June 2021 about 20% lower than before the pandemic, according to the BEA.
“Spending on motor vehicles and parts rose more than 40% above their pre-pandemic level in March and April before declining in the past two months,” Anderson said. Even so, “spending on goods and recreational vehicles, including boats and recreational vehicles, is currently about 30% higher than before the pandemic.
See Anderson’s full analysis of this report: https://bit.ly/3jqGVpq.