March Consumer Spending Sees Sharpest Drop On Record

Consumer spending in the U.S. plummeted 7.5 percent in March, the steepest drop in 61 years, as the coronavirus pandemic continues to ravage personal income, according to the Thursday (April 30) report from the Commerce Department. 

According to the report, the country experienced big declines as “consumers canceled, restricted or redirected their spending.” 

Personal income dropped 2 percent or $382.1 billion. Disposable personal income decreased by 2 percent or $334.6 billion, and personal consumption expenditures declined $1,127.3 billion or 7.5 percent.

The second half of March experienced the biggest declines as the government issued stay-at-home orders and closed all but essential businesses. As the lockdown continues across most of the country, people have seen their paychecks vanish and curtailed spending accordingly. Economic growth has been stifled due to record-high unemployment and a drop in the gross domestic product (GDP) of 4.8 percent.

“I think this is the tip of the iceberg,” Blerina Uruçi, a senior U.S. economist at Barclays, told The Wall Street Journal. “The worst is yet to come with the April data.”

Consumer spending accounts for 70 percent of economic activity. Spending is forecasted to drop even more in the second quarter of 2020, according to analysts, and the GDP could contract 40 percent, the biggest quarterly decline on record.

“GDP numbers are weak, but in line with expectations as a result of the COVID-19-driven disruptions to daily lives at home and around the globe that have rocked global markets and supply chains. We continue to have the most resilient economy in the world, driven by innovative and hardworking Americans who have shown that they are willing to make the needed sacrifices to defeat this invisible enemy,” U.S. Secretary of Commerce Wilbur Ross said in a statement.

Until a vaccine is developed for the coronavirus, economists are concerned that the downturn will continue, according to a report in Talking Points Memo.

“The coronavirus fear, the social distancing measures, the financial volatility and plummeting confidence have taken a severe toll on consumers’ ability and willingness to spend,” said Lydia Boussour, senior U.S. economist at Oxford Economics.

Recent data compiled by PYMNTS indicates that the majority of consumers expect the pandemic to stretch into the fall, and that even when it’s “over,” their lives will be either somewhat or drastically altered. Among those surveyed, 32 percent report that they will perform more activities at home and fewer activities away from home than before, and 16.1 percent say they will not resume any of their pre-outbreak activities once the pandemic has passed.