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Why August’s Consumer Spending on Clothing, Footwear Slumped Again

Consumer spending on clothing and footwear declined for the second consecutive month in August, falling 0.58 percent to $396.36 billion, as the economic effects of the coronavirus pandemic continued to take its toll, according to estimates released Thursday in the Personal Income & Outlays data from the U.S. Bureau of Economic Analysis (BEA).

This followed two straight months of increases in spending in the category. BEA’s report also showed a decline of 3.75 percent from the $411.8 billion spent on clothing and footwear in August of last year.

Overall personal consumption expenditures (PCE) increased 1 percent, or $141.1 billion, in the month. Real PCE, adjusted for inflation, increased 0.7 percent, or $86.1 billion. The PCE price index increased 0.3 percent.

BEA said the rise in real PCE in August reflected an increase of $87.9 billion in spending for services that was partly offset by a $10.3 billion decrease in spending for goods. Within goods, the leading contributor to the decrease was spending for food and beverages purchased for off-premises consumption.

U.S. Census Bureau and National Retail Federation statistics and analysis for August retail sales showed clothing and accessory store sales were up a seasonally adjust 2.9 percent month-over-month, but were down and unadjusted 23.5 percent year-over-year.

“August was topsy-turvy, as Covid-19 brought a lot of shifts and uncertainty regarding back-to-school spending and other issues but consumer spending remains intact even if sales grew less than July,” NRF chief economist Jack Kleinhenz said. “Some consumers likely reduced their spending with the end of the $600 supplemental unemployment benefits for those out of work, but a building-up of savings from that and other government cash helped support spending.”

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Personal income decreased 2.7 percent, or $543.5 billion, in August, while disposable personal income (DPI), a key gauge of retail spending, decreased 3.2 percent, or $570.9 billion. Real DPI fell 3.5 percent in the month.

“The August estimate for personal income and outlays was impacted by the response to the spread of COVID-19,” BEA said. “Federal economic recovery payments slowed, as pandemic-related assistance programs begin to wind down. The decrease in personal income in August was more than accounted for by a decrease in unemployment insurance benefits, based primarily on unemployment claims data from the Department of Labor’s Employment and Training Administration. In particular, the Federal Pandemic Unemployment Compensation program, which provided a temporary weekly supplemental payment of $600 for those receiving unemployment benefits, expired on July 31.”

Partially offsetting the decrease in unemployment insurance benefits was an increase in compensation in August, BEA noted. Government wage and salary disbursements increased $17.5 billion in August, following an increase of $14.5 billion in July. Temporary and intermittent Census decennial workers boosted government wages and salaries by $10.8 billion in August.

Personal outlays increased $152.9 billion in August. Personal saving was $2.43 trillion in the month August and the personal saving rate–personal saving as a percentage of disposable personal income–was 14.1 percent.