US consumer spending recovery remains lopsided

US consumer spending* jumped 2.4 percent month-over-month in January 2021, returning total spending to the same level seen one year ago – prior to the pandemic. Improving labor markets, plus another round of fiscal supports and vaccine distribution, likely contributed to the January swell. However, the composition of spending presently looks quite different, relative to pre-pandemic activity.

The impact of COVID-19 on consumer behavior had a major impact on how and what US residents are spending their income on.   Spending on services, like travel and entertainment, is down 5.3 percent from a year ago. Prior to the pandemic, services accounted for 69 percent of consumer spending. Spending on durable goods, which include things like televisions and barbeques, is up 18.6 percent from a year ago and spending on non-durable goods, such as food and clothing, is up 6.1 percent.

As the threat of the virus dissipateswe may see another large shift in spending patterns emerge. Looking ahead, we anticipate a surge in consumer spending on services to occur as consumers feel more comfortable dining out and going on vacations. However, this may come at the expense of durable and non-durable goods consumption.

 *Consumer spending as measured by the Bureau of Economic Analysis’ Personal Consumption Expenditure data