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American consumers stop spending on anything other than groceries and the pharmacy

US consumers use their credit cards only for groceries and drugstores, while trying to reduce their debts and increase savings amid the economic uncertainty caused by the corona virus pandemic.

According to data released by Visa, a fifth of their US payment volume is now in food and drug stores, including stores such as Walmart, Costco and Target, up about 20 percent in April.

It was the only spending category to see an increase last month as consumers cut their discretionary spending, increased their savings and paid off their credit cards.

Travel spending fell by 80 percent in April, while retail, car, healthcare, and education spending all fell by 15 to 50 percent.

American consumers continue to use their credit cards in the supermarket, but have cut back on other expenses, according to Visa. Pictured is a supermarket in Brooklyn on Monday

American consumers continue to use their credit cards in the supermarket, but have cut back on other expenses, according to Visa. Pictured is a supermarket in Brooklyn on Monday

The US consumer price index for April was released on Tuesday and showed a price drop due to the sharp fall in gasoline prices. The food sector saw the biggest price hike as consumers cut back on spending money on something other than groceries and the drugstore

The US consumer price index for April was released on Tuesday and showed a price drop due to the sharp fall in gasoline prices. The food sector saw the biggest price hike as consumers cut back on spending money on something other than groceries and the drugstore

The US consumer price index for April was released on Tuesday and showed a price drop due to the sharp fall in gasoline prices. The food sector saw the biggest price hike as consumers cut back on spending money on something other than groceries and the drugstore

Overall, credit card spending declined 31 percent through April 28.

Spending on telecom, utilities and insurance fell sharply by 15 percent at the end of March, but leveled off last month.

The only other spending category that peaked in April was gaming that grew 200 percent.

“The consumer who is the beating heart of the real economy is preparing for a much longer delay than what policymakers tell them,” said Joe Brusuelas, chief economist at consultancy RSM. CNN.

While more than 33 million Americans have applied for unemployment benefits since the shutdowns in mid-March, even those who still have jobs are cautiously outsourcing as fears may become unemployed in the coming months.

“Consumers are very cautious,” said Russell Price, chief economist at Ameriprise Financial.

“We’re in the middle of the storm.”

According to a New York Federal Reserve Survey released Monday, 21 percent of Americans think they can lose their jobs in the next 12 months.

And only 47 percent see it as likely that they will be able to find a job again in the next three months, as the survey indicates a record depth of income that U.S. households will earn this year.

“We know Covid hasn’t disappeared,” Danielle DiMartino Booth, CEO and chief strategist at Quill Intelligence, told CNN.

“That will maintain an element of uncertainty and fear, and hinder the consumer’s ability or desire to spend.”

Rather than spending, consumers have built up their cash reserves as US savings rates rose from 8 percent in February to 13.1 percent in March.

This was the highest savings rate since November 1981 and is expected to be even higher once the statistics for April are released.

Consumers are not only slowing down their credit cards, but are also cutting back on their debts.

Typically the most expensive form of borrowing, a previous Federal Reserve report revealed that outstanding revolving credit collapsed in March at an annual rate of 31 percent.

As fears of losing jobs and income grew, so too did fears of missing a future credit card minimum payment in the next three months to 16.2 percent.

Economists have warned that even with the removal of coronavirus limitations, spending will not immediately return to how it was before the shutdowns began in March

Economists have warned that even with the removal of coronavirus limitations, spending will not immediately return to how it was before the shutdowns began in March

Economists have warned that even with the removal of coronavirus limitations, spending will not immediately return to how it was before the shutdowns began in March

The increase in demand and the persistent consumer spending on food supplies increased the price of meat in April. General prices in the United States have fallen, according to the April consumer price index released Tuesday

The increase in demand and the persistent consumer spending on food supplies increased the price of meat in April. General prices in the United States have fallen, according to the April consumer price index released Tuesday

The increase in demand and the persistent consumer spending on food supplies increased the price of meat in April. General prices in the United States have fallen, according to the April consumer price index released Tuesday

“People have severely limited their expenses. You have to wonder when they will feel comfortable splashing, ”Booth said.

The widespread business stoppages, reduced travel and shrinking consumer spending that caused the virus are likely to have left the US economy in a severe recession.

Consumer spending in the United States accounts for about two-thirds of GDP, but it is a disaster if the reduced spending trend continues.

Economists also warn that even lifting shelter-in-place orders will not automatically lead to a return to normal spending patterns.

“Even if you’re a multi-millionaire, you’re going to be much less likely to go to restaurants, baseball games, and travel by air,” Price said.

The drastic changes in spending and the recent decline in economic activity are also exerting strong downward pressure on prices across the economy, with food at home as one of the only sectors to see a price hike.

According to the Consumer Price Index report published Tuesday, April had the sharpest monthly drop in consumer prices in the US since the 2008 financial crisis – a 0.8 percent drop due to a dip in gasoline prices.

And excluding the normally volatile food and energy categories, so-called core prices fell 0.4 percent last month, the Labor department said.

That was the sharpest drop in records from 1957.

The absence of any inflationary pressures has given the Federal Reserve room to keep interest rates ultra-low as it aims to help reboot the economy.

But Tuesday’s report brought out the prospect of deflation, a long-term drop in prices and wages that have typically left people and companies reluctant to spend and prolong a recession.

Not since the Great Depression of the 1930s, deflation in the United States has been a serious economic threat.

“If deflation becomes anchored in the economy, it can be difficult to dislocate,” said Gus Faucher, chief economist at PNC Financial Services.

“Aggressive actions by the Fed can help prevent deflation from starting and support a stronger economy in the longer term.”

Even before the pandemic broke out, oil prices had plummeted, but the viral outbreak made the decline even greater.

Last month, gasoline prices fell by more than 20 percent. Clothing prices, airplane rates and hotel and motel costs have also fallen sharply.

Eating at home is one of the few areas where prices are now pushing up, with the largest monthly increase since February 1974.

The April price index for meat, poultry, fish and eggs was up 4.3 percent from a month earlier, as the supply chain was hit by coronavirus outbreaks at manufacturing plants.

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