Background
We’ve already seen obvious spending changes during COVID – like more sin purchases and home office expenses. Looking at full year 2020 data also shows that COVID spending telegraphs evolving fears. A year into the pandemic, spending behavior has settled into a long-run trend. What does this tell us about what we fear? This analysis looks at how spending has changed from December 2019. Comparisons are to the nadir of spending in April 2020, and to the most recent data from December 2020.
Findings
- Fear of dying from something besides COVID: Spending on health care initially tanked, down by a third, as people were unwilling or unable to get medical care. But by December health spending was almost back to normal. Presumably we all heard the messages that we could have all kinds of health problems if we neglect our care. In addition, we were bombarded by messages from health care providers outlining all their safety measures.
- Fear of dying without providing for others: Spending on life insurance was up 7% year over year, as firms saw a double digit percent increase in policies written, reversing a two-decade decline.
- Fear of dentists: Spending on dental care plummeted by 2/3 in April, when your dentist probably wasn’t even open. By year end, when you might expect above normal business as people finally went back to their dentist, spending was sill 15% below a year ago. This analysis will avoid psychological analysis regarding if people use COVID as an excuse to avoid one of their least favorite things.
- Fear of flying – Commercial airline spending is still down by half vs. a year ago. Despite massive efforts by the industry to encourage travelers to return, both the airline and hotel industry remain hugely depressed.
- Fear of cooking – Fast food restaurant meals are almost back to pre-pandemic spending.
Implications
While the parallel increase in both health care spending and fast food spending may seem counterproductive, it’s not unexpected. We are trying to return to life as normal – or as normal as we feel safe living it. That means seeing your doctor again. It also means being tired of cooking (who really wanted to prepare dinner every night?).
Ultimately, this data suggests what previous posts have pointed to: we are defining a new version of “safety”. We apparently see as low-risk (for virus transmission) things like visiting doctors, and McDonalds, but we don’t believe that travel is safe. The panic buying of life insurance may be a brief jump. However, it may also suggest to financial advisors that this is a good time to have an insurance discussion while people are more open than ever to the idea. Ultimately, COVID spending telegraphs evolving fears.
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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. “Fast food” is what the BEA defines as “limited service” restaurants, where you don’t sit down and get table service.