The Lack of Fiscal Aid Won't Wreck Consumer Spending
Savings rates suggest U.S. households should be able to maintain their recent pace of consumption even without another round of stimulus.
U.S. consumers have gone on a shopping spree.
Photographer: Bloomberg
In the world of investing, self-storage properties are about as bland as it gets. Then again, U.S. consumers are going to need a place to store the mountains of stuff they bought during the pandemic. Retail sales soared 1.9% in September, more than doubling analysts’ estimates of a 0.8% gain. The surge came despite the end of enhanced unemployment benefits at the end of July. Although concern is rising that the absence of a new fiscal aid package will cause retail sales to falter, such worries give too much importance to fiscal aid in supporting retail sales and not enough importance to the changing composition of household spending.
The fiscal aid from earlier this year, tax rebates, forgivable loans to businesses and enhanced unemployment benefits are widely believed to have saved retail spending. Although those moves helped, what seems to have been forgotten is that the drop in aggregate spending — which accounts for about two-thirds of the economy — early in the crisis actually exceeded the drop of incomes after excluding transfer payments. In short, saving rates would have risen even without the extra fiscal aid.