NNN">

Foreign

Feature: COVID-19 pandemic changes Americans’ spending habits

Published

on

The United States has been known for decades as a place where people “shop ’til you drop,” and Spend! Spend! Spend!

The COVID-19 pandemic, however, might be facilitating changes in Americans’ spending habits.

With the country on lockdown, the country’s personal savings rate has surged overnight to historic highs.

After all, there is not many places where you can walk in and unload your wallet.

With the pandemic lockdown putting millions of Americans out of work – the jobless rate has exploded to near 15 percent – many Americans are saving more in case they fall on hard times.

“I think I am saving more money during the lockdown. No gas, lunch money, less spending on clothes,” an IT worker in the Washington D.C. area, who gave her name as Sherill Kozchek, told Xinhua.

Indeed, Americans are suddenly saving at a rate not seen since 1981, according to the U.S. Bureau of Economic Analysis (BEA).

The BEA reported on April 30 that the savings rate skyrocketed to 13.1 percent in March – an increase from 8 percent in February, before the lockdown. That amounted to Americans having 2.17 trillion U.S. dollars in savings in March.

For the sake of comparison, that puts the personal savings rate near that of Germany’s 2019 rate of 10 percent, according to figures from the Organization of Economic Co-operation and Development (OECD), published before the lockdown.

Savings are likely driven by a decline in consumer spending due to so many businesses closing amid the lockdown. The BEA also reported that consumer spending dropped by 7.5 percent. Americans spent less on recreation, non-essential medical care and cars. Spending went up on food eaten at home, the BEA found.

SAVINGS RATES RISING SLOWLY FOR YEARS

Over the past couple of years, Americans’ savings rates have slowly been on the rise.

“The savings rate had risen dramatically in the last couple years already,” according to Robert Frick, corporate economist with Navy Federal Credit Union, in a recent tweet.

“Speculation is people were bracing for the next recession,” Frick added.

Indeed, the personal savings rate in November and December 2019, a few months before the coronavirus hit the United States, was 7.8 percent and 7.6 percent, respectively, according to the BEA’s website. That’s two or three times the rate of savings during many months in 2017, just a couple of years back, according to the BEA website.

Clay Ramsay, a senior research associate at the Center for International and Security Studies at University of Maryland, told Xinhua that currently, “those with jobs are tending to hold cash to the degree that they can. Those without jobs will be more likely to save when they are earning again. This happened after the 2008 crash.”

While Americans’ personal savings rates are on the rise, there are many reasons they didn’t save in the past.

Ramsay noted that college education, which is the basis for higher earnings, is increasingly expensive and has created a debt load on society for many years.

Second, the United States pays nearly double the health expenses of similar high-income countries, and this is reflected in individuals’ expenses.

Some economists fret that the virus will spur the onset of deflation – a debilitating phenomenon that occurred during Japan’s so-called “lost decade” between 1991 and 2001.

Deflation happens when people stop spending money. That means sellers make less money, which leads to a vicious cycle in which workers earn less and cannot afford the consumer spending that drives the economy.

But at the same time, it’s in Americans’ nature to spend, and deflation worries may be inflated.

Janice Kim, a logistics professional in the D.C. area, told Xinhua: “I spend less on dining but that has become an excuse to spend the money elsewhere!”

(XINHUA)

I take my hat off to Hamilton, old foe Rosberg says Real Madrid snatch draw at Borussia Monchengladbach with late Casemiro goal Zapata double allows Atalanta to fight back and share points Sanusi shines as Vieira bags maiden Champions League goal in FC Porto’s victory Felix brace gives Atletico Madrid vital win in UEFA Champions League Fabinho joins Van Dijk on Liverpool’s defensive injury list Guardiola confident Manchester City will find consistency Bayern Munich edge past Lokomotiv Moscow to stretch winning run Manchester City thrash woeful Marseille to stay group leaders in Champions League PMI: Nigeria’s manufacturing sector records growth, says CBN ##ENDSARS Protests: Women group wants urgent answer to youths’ requests Liverpool labour to 2-0 win over Midtjylland COVID-19: NCDC confirms 3 additional deaths, 113 new new infections in Nigeria Protests: Lagos deserves empathy, APC tackles PDP for faulting estimated N1trn for restoration FC Barcelona president resigns, board of directors join in quitting FG to construct 10 new airports — Minister Opposition parties congratulate INEC chairman on his reappointment Lagos Firemen avert another explosion  EndSARS: Group calls for peace, truce between protesting youths, government EndSARS protests: Gov. Ugwuanyi constitutes panel on victims Anambra FA elections: Appeals committee disqualifies Okeke FCT administration to decentralise emergency outbreak response in 6 area councils EndSARS: 2 officers, 1 civilian killed in Ondo — CP FG assures of improvement in oncology practice Protest: Gov. Oyetola says no extension of amnesty for adamant looters I was almost stabbed by Kubwa NYSC Camp looters–DPO Engagements with Nigerian youths transparent, honest–Osinbajo World 100m champion to miss Tokyo Olympics after 2-year ban Buhari nominates Yakubu for second-term as INEC Chairman Enugu State Govt. upgrades Ogbede PHC to General Hospital Amotekun: Gov. Makinde approves recruitment of 1,500 personnel We have no unshared palliatives,Umahi tells Ebonyi residents Banks customers in Benin lament poor services, long queues at ATMs 2021 budget: Delta appropriates over N33.7bn for education, youth, other sectors, says Okowa FIFA President tests positive for COVID-19 NHRC condemns alleged killing of police officers Anambra State FA Elections: Old issues, new crisis #EndSARS: Plateau Lawmakers condemn looting, destruction of Public and Private Properties President Buhari approves digitisation of NFVCB library Gov. Lalong relaxes 24-hour curfew imposed on 2 LGs EndSARS: Minister laments looting of Kaduna NAFDAC Office FG says plans underway for effective transport system for civil servants I will sign executive order to recover looted property — Fintiri Bauchi Govt establishes 17-member panel to investigate Human Rights abuses by security agents AKTH mulls liver transplant – CMD Only 19,600 COVID-19 tests conducted in Oyo – State Epidemiologist FG disburses N6bn to poor households in Zamfara – Minister Gov. Abiodun approves N87.3m counterpart fund payment Buhari mourns Akinyele, ex-Presidential Adviser 4 under-aged, 2 others arraigned over alleged arson in Ekiti