|
|
During the COVID War, consumers bunkered at home and focused their spending on buying “stuff” while restaurants, gyms, and concert halls were closed and travel was restricted.
Now, consumers apparently have enough cars, couches, food processors, and home exercise equipment; spending on services is rising, bringing outlays on goods and services back into balance.
Goods made up about 31 percent of consumers’ spending in 2018 and 2019, rising to 36 percent in April and May 2021, just before COVID vaccines became available.
In December, goods accounted for 34 percent of consumer outlays, the second consecutive month of declines.
Consumers also have lost enthusiasm for buying things as inflation and supply disruptions boost prices and government stimulus payments have ended.
Prices for furniture, appliances, and other merchandise rose 10.7 percent in December, year over year, while the cost of services such as airline tickets edged up just 3.7 percent.
The recovering labor market and wages that rose 4 percent last year will give consumers additional purchasing power to invest more in services.
“The GDP growth we’re seeing now, the excess consumer savings, the customer spending in other categories, and even things like New York City rents snapping back all seem to indicate real strength for the consumer and pent-up demand that wasn’t there in the past,” David Fintzen, a vice-president with JetBlue Airways, said in an earnings call earlier this month.
TREND FORECAST: With our forecast of the COVID War winding down by late March, mid-April—and draconian mandates being lifted—the once sheltered-in-place population wants to let loose, go out, dine out, travel, and spend on entertainment. Therefore, there will be a continuing shift away from hard goods to services.
At that point, the economy will begin to settle into a new “normal” that will include permanent changes including remote work and the speedier transition to more widespread automation.