Background
We’ve seen spending recovering over the course of the COVID pandemic; as summer wound down, August 2020 personal consumption spending was only 2% below August 2019. But given that some spending is still depressed (hotels, airlines, public events), where has spending increased to compensate? We already know Americans are getting outside more than the rest of the world – see a previous post. But what is driving at-home COVID cocoon spending jumps?
Findings
- Living costs – gotta eat and clean: Grocery purchases are up 10% (over $8B/month), along with household supplies (10%).
- Working costs: Electricity costs are up 8% as people use more at home. Computer and software spending is up 19% which one would think is work related, unless it’s a rush to play Call of Duty or Fortnite.
- Playing costs: The recreational category, driven by games, hobbies, and pets, is up 13%. There has also been a big jump in spending on household furnishings as we turn our eyes to improving our homes.
- Reading?!? – The newspaper and periodicals category is up 24%/$1.1 billion a month! The BEA indicates that the big jump was in digital subscriptions in April and May. Conde Nast reports a doubling in new subscriptions.
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Implications
It’s obvious that when we spend more time at home, we spend more money at home. That part of these findings is unlikely to shock anyone. Of more interest is the impact of the trends of COVID cocoon spending jumps:
- Will employers compensate for home office expenses? Electricity and office furnishings are added expenses to working at home. Of course, they’re offset by lower costs for commuting and clothing (both of which have dropped in the past 6 months) so perhaps we call it a wash.
- Will the home nesting projects continue? At some point, presumably we will have redone the guest room, replanted the garden, and painted the kitchen. Subsequently, spending on home improvements should fall.
- Will reading make a comeback? Whether we are seeking more pleasure in reading, more information during the campaign cycle, or just something to peruse in the bathroom, this is an interesting trend that might suggest a return to quieter pleasures.
The small print
The spending data comes from the BEA. The spending increases are not adjusted for inflation, though inflation was very low during the last year so this doesn’t change the conclusions. The changes in spending vs. August 2019 are almost the same as if we compared to February 2020, the last pre-pandemic impact month. Household supplies is primarily cleaning products and paper products.