In the early days of the coronavirus scare in the United States, the impact on what type of goods people were going to buy and how much they were going to spend started to creep into the national psyche, according to data released Friday by the Bureau of Economic Analysis (BEA).
Consumer spending on clothing and footwear fell 1 percent to $407.71 billion in February compared to $403.67 billion spent in January. It marked the second straight month of spending declines for the category, as the economy showed signs of wobbling before COVID-19 fully took hold in the country this month.
Economists and consumer analysts expect a deep decline in March spending, as evidenced by this week’s nearly 3.3 million people new unemployment insurance benefits claims, as apparel and footwear stores closed across the country with the pandemic sweeping across the country.
According to the NPD Group, in the week ended March 14, consumers continued to shop, but the composition of their purchases changed as they focused on necessities for their new reality.
“Changes are just beginning, but NPD’s weekly U.S. consumption trends already reveal a change in selling strategies, with average selling price down nearly 6 percent compared to last year, led by apparel declines but offset by increases in office supplies driven by cleaning and disinfectant supplies,” Marshal Cohen, chief industry advisor at NPD Group, said. “The second week of March saw U.S. consumers move further into the ‘stay-at-home’ lifestyle and dramatic shifts in consumption emerged as a result.”
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NPD said it expects to see continued sales changes in the coming weeks due to retail store closures, entertainment and sports shutdowns, changes in restaurant transactions, and city and state lockdowns.
“An online sales boost and dominance of buy-online-pick-up curbside options are inevitable,” Cohen said. “We will see millennials adjust their habits as they face the second financial crisis in their young adult lives. And our supply chain will shuffle between urgent replenishment and halted needs.”
The BEA report showed overall personal consumption expenditures (PCE) increased 0.2 percent, or $27.7 billion. Real PCE, adjusted for inflation, generated a $13 billion increase in February, reflecting an $18.3 billion increase in spending for services that was partly offset by a decrease of $7.7 billion in spending for goods. Within services, the leading contributor to the increase was spending on electricity and gas. Within goods, the leading contributors to the decrease were spending on motor vehicles and parts as well as recreational goods and vehicles.
The PCE price index rose 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent.
Personal income, which should nosedive in March, increased 0.6 percent, or $106.8 billion, in February. Disposable personal income, a key gauge of retail spending in normal times, increased 0.5 percent, or $88.7 billion, in February. Real DPI was up 0.4 percent in the month.
Personal outlays advanced $28.4 billion in February. Personal saving was $1.38 trillion and the personal saving rate–personal saving as a percentage of disposable personal income–was 8.2 percent.