Households Expect to Spend More, But Mostly at Home
Looking at the year ahead, U.S. consumers surveyed in August anticipated a bigger monthly increase in household spending than they did during the early days of the pandemic—but mostly on items related to staying home as opposed to going out, a new report from the Federal Reserve Bank of New York showed.
Consumers expected their monthly household spending to increase by a median 2.2% over the next year, up from the 1.5% increase they anticipated in April, when the COVID-19 outbreak was more acute, the New York Fed said Monday. The increase doesn’t reflect a full recovery in spending behavior, however, since the comparable figure in the previous survey period—December 2019—was 2.4%.
Even as states moved forward with reopening, survey respondents showed cautiousness about consumption outside the home. They expected outlays on utilities and food to increase at a greater or similar pace than in April and spending on transportation and clothing to increase at a slower pace than in April. When asked about the chances they’d make major purchases over the next four months, respondents reported an increased likelihood of making home repairs and buying electronics, furniture, and home appliances but indicated a lower likelihood of purchasing vacations and vehicles.
“Stay-at-home consumption is where consumers are at this point,” said Dennis Hoffman, a professor at Arizona State University who specializes in macroeconomics, in an email. Savings built up during the pandemic are likely allowing consumers to continue spending, he said.
Meanwhile, a separate New York Fed report showed consumers were far less sure the government would increase unemployment benefits over the next year than they were in April.
Emergency pandemic relief, including a $600 supplement to weekly unemployment benefits, had been crucial in bolstering consumer spending during the crisis, research shows, but the program ended in July (and was then replaced by a state-administered $300 supplement lasting six weeks.) The average perceived probability of a drop in unemployment benefits rose to 22% from 14% in April, while respondents saw a much smaller chance of an increase in these benefits—31% down from 53%.