Is America Obsessed With Shopping?
In the wake of the pandemic, Americans have unleashed a shopping spree like never before. The geopolitical tides have shifted, and as a result, the nation’s buying habits are in overdrive.
While the service sector still maintains its dominance in the economy, it’s hard to ignore the surge in goods spending that’s been sending the cash registers ringing. Let’s dive into why Americans can’t resist the allure of shopping carts and digital checkout buttons.
The Experience Economy Takes a Backseat
Remember those carefree days when you could indulge in concerts, theatre shows, and weekend getaways? The pandemic bulldozed the experience economy, leaving people with limited avenues for spending on services. The closure of entertainment venues, travel restrictions, and prolonged lockdowns meant there was little to splurge on other than goods.
According to Bank of America Research, traditional entertainment spending plummeted by a staggering 90% year-over-year in the early months of the pandemic. With no experiential options, Americans redirected their spending towards durable goods.
As the world cautiously reopens, people are now itching to splurge on dining out, traveling, and other activities. Yet, the rebound of the service sector has been slower than the skyrocketing goods consumption.
Reshaping Lifestyles for the Pandemic Era
Life in a pandemic era required reimagining daily routines. This translated into a surge in demand for durable goods as Americans adapted to a home-centric lifestyle. The shift to remote work prompted investments in personal tech, transforming living rooms into makeshift offices. Cars became more than vehicles; they represented safety bubbles in uncertainty.
Within the confines of homes, Americans embraced a new way of living. A year of being homebound fueled spending on home improvement, with purchases ranging from furniture to kitchen gadgets.
A McKinsey report revealed that these lifestyle investments are likely to persist post-pandemic. Bank of America Research echoes this trend, noting a 36% increase in furniture spending and a 35% uptick in home improvement spending compared to two years prior.
The Stimulus Check Surge
The US government’s issuance of three stimulus checks between April 2020 and March 2021 set off a frenzy in goods spending. With discretionary spending on hold due to the pandemic, these financial boosts led to excess savings, reaching a staggering $2.6 trillion by mid-April, according to Moody’s Analytics. As restrictions eased, Americans began to spend more than they did pre-pandemic, as reported by Insider citing Visa data.
While some used stimulus checks responsibly to address financial concerns, many diverted them towards goods they needed to navigate life during lockdown. This injection of funds contributed to the surge in buying, as people invested in everything from home essentials to gadgets.
A Rebound From a Long Slump
Durable goods spending had been subdued since the 2008 financial crisis, veering away from long-run trends. This peculiar scenario doesn’t entirely explain the sudden surge during the pandemic. Yet, it serves as a reminder that normalizing goods spending shouldn’t come as a surprise.
JP Morgan points out that while the reasons for this trend’s resurgence are multifaceted, it’s wise not to anticipate a slump in the demand durable goods. The post-Great Recession period saw a substantial 12% decline in durable goods spending, significantly outpacing the 3% drop in nondurable goods.
Cars, furniture, and household items were particularly affected and only regained their pre-recession momentum after 2013. Interestingly, these are precisely the areas that have witnessed heightened spending since the pandemic’s onset. This resurgence suggests that the newfound importance of these goods during the pandemic could have contributed to levelling out the decline from the Great Recession.
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