Personal spending in the United States has massively dropped by 7.5 percent on a monthly basis. Data compiled by Finbold reveals that compared to February 2020, U.S. personal spending in March has seen the worst performance since 1959. Back in February, it raised 0.2 percent compared to January.
The U.S. Personal spending is measured by the Personal consumption expenditures (PCE) index, which takes into account how much of the income earned is spent by U.S. families. The PCE is used to measure consumer spending on goods and services. This represents also two-thirds of the domestic final spending and it is a great tool to understand future economic growth.
This massive drop represents the largest decline in personal spending on record, which means since 1959. There was no crisis during the last 60 years that affected in such a negative way the personal spending of U.S. families.
The PCE is showing that this was the largest decline in personal spending in U.S. families in history. This also allows economists and analysts to understand which services and goods are being consumed in the current times by U.S. households. Furthermore, the PCE can be useful to understand how consumers react to price changes and market movements.
Our report is also showing that the personal spending in the country could fall by 2 percent by the end of this quarter. Finbold.com analysts’ projects that personal spending in the U.S. could stand at 0.50 in the next 12 months.
Things seem to be better over time, specifically by mid-2021 when the expectations related to household spending in the largest economy in the world are trending towards 0.70 and moving even higher by 2020 to 1.00 percent.
The entire Coronavirus crisis has severely hit economies all over the world. The United States is not an exception. Several states have proposed different lockdowns in order to help them reduce the expansion of the COVID-19 virus.
Countries such as Italy and Spain have been some of the most hit, while the U.S. remains by far the most affected in the world with more than 1,710,523 cases and almost 100,000 deaths. Economies have been certainly damaged and this may take a while to recover.
As it was shown in the previous charts, the recovery would come in the form of a ‘U’ rather than a ‘V’. These kinds of recovery take more time in order to impact the population and may produce changes in the way companies work and behave.
One of the sectors that would be the most damaged is related to the tourism industry. Holidays, vacations and trips are not going to be the same as they were before. Airlines and hotels would definitely be affected by the reduction in the expenditures of U.S. households as well.