Data Shows Lower-Income COVID-19 Aid Recipients Quickly Spend The Funds

Lower-income recipients of COVID-19 relief payments are quickly spending the money they get, the Wall Street Journal reported Sunday (Feb. 14), citing data gleaned from tracking of usage of debit and credit cards.

The federal government began sending a new round of stimulus payments to families of individuals making less than $75,000 annually during the first week of calendar 2021. In sync with the payments, consumer spending in the week that ended Jan. 10 surged by more than 20 percent compared with the year-ago week, according to an analysis the Journal cited from research shop Opportunity Insights that was based on data from Affinity Solutions, which follows use of debit and credit cards.

During the same 2021 period, spending by higher-income households was flat.

The Journal quoted Jonathan Silver, chief executive of Affinity Solutions, as having said that among households that received payments, 88 percent spent the money “like it burned a hole through their pocket.”

The quick spending of the funds showed “significant pent-up demand for necessities” among lower-income households, the Journal quoted Silver as having said.

January sales data released by retailer Costco also suggests recipients of January stimulus payments were quick to spend them.

In an interesting take on spending data, the Center for the New Middle Class found, according to Fast Company, that regardless of income, stimulus check recipients with higher credit scores indicated they would save the money while recipients with lower credit scores planned to spend it.

The idea that consumer spending will remain strong in 2021 has been reinforced by the Federal Reserve Bank of New York’s January “Survey of Consumer Expectations.” The report found that consumers’ expectations of increased spending for the coming year had hit a 5-year high.

The National Bureau of Economic Research found in an August 2020 analysis that lower-income households also were more likely to spend, rather than save, the first stimulus payments.