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Consumer spending
American Middle Class

WILL U.S. CONSUMERS CONTINUE TO SPEND?

Consumer spending makes up to 70 percent of the United States’ nearly $19.4 trillion gross domestic product (GDP).   For the first two months in 2020, consumer spending increased by 0.2 percent based on the Bureau of Economic Analysis’ data.  Now the world’s largest economy, along with the rest of the globe, is wrestling with a pandemic that forced businesses to close and consumers to stay home.

Amazon, Walmart, and other retail stores are seeing exponential sales growth. While job losses are already in the millions, Amazon announced a couple of weeks ago that it would hire more than 100,000 new workers to meet customer demands.    But it is unclear whether or not that additional spending on toilet papers will make up for the rest of the goods and services that consumers are not purchasing.

Personal Consumption Expenditures/Consumer Spending

Personal consumption expenditures track how much U.S. consumers spend on goods (durable and nondurable) and services.  Federal, state, and local governments ask American consumers to stay and practice social distance. The uncertainty of COVID-19 also forces them to spend their money on essential items, not on durable goods such as cars and washing machines.

Real estate agents are not showing houses, car lots are empty, and people are canceling dental care and other non-emergency healthcare appointments.

A decline in spending on durable goods seems to be inevitable, but can the spike on foods, toilet papers, and other staple items prevents a decrease in GDP growth.

Before the pandemic outbreak, American consumers were already doing a bulk of their shopping for all types of products online. They bought their washing machines on amazon, picked their car, which they purchased on the internet, from a vending machine, and used telemedicine. In some sense, American consumers were inadvertently trained for a stay in place mandate.

With consumer spending being such a large percentage of the GDP, the country hopes that consumers, who still have disposable income or savings, will buy their washing machines online.

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