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For the most part, Americans spent very little during the pandemic — up until now.
On Tuesday, May retail sales shattered expectations, jumping 17.7% in the biggest monthly surge ever. President Donald Trump was quick to post on the news.
Nearly half of all consumers had said they were saving more during the coronavirus crisis by cutting out purchases such as clothing and gas, according to a survey by MassMutual.
In April, the personal savings rate hit a historic 33% while consumer revolving-credit balances, which is comprised mostly of credit card debt, sank by 65% in the same month, compared to a year earlier, after falling 29% in March.
“We all expected to see that credit card balances fall in April, but these numbers are still staggering,” said Matt Schulz, chief industry analyst at CompareCards. “It’s not realistic to think those types of declines will continue.”
It’s clear, after the record jump in retail sales, that many Americans have already started to loosen the purse strings.
We’re seeing some of that pent-up demand come back.
Vasant Prabhu
Visa’s chief financial officer
According to MasterCard, spending has begun to “normalize” after bottoming out in the spring. Visa also reported increased outlays on food, home improvement and retail services in May.
“We’re seeing some of that pent-up demand come back,” said Vasant Prabhu, Visa’s chief financial officer, in a June 2 webcast.
More than a quarter of Americans said going out to eat is the first thing they are spending money on as social distancing guidelines are lifted, followed by traveling to visit family and getting a haircut, according to a recent report by CompareCards.
More than half of those polled are waiting for the pandemic to end to splurge on an even bigger expense, such as a home repair or new car, CompareCards found. The card comparison site surveyed more than 1,000 adults in late April.
“Once we get the all-clear, I think there’s going to be a huge amount of spending,” Schultz said.
For many, federal stimulus helped provide some financial security, which has encouraged shopping once again.
The $2 trillion CARES Act authorized sending checks to millions of Americans and added $600 per week to unemployment benefits to help those put out of work by the coronavirus shutdown.
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However, the extra $600 per week is set to expire in July and while there has been talk of another set of $1,200 payments, those discussions likely won’t get serious until late July, as well.
“The question is what happens when that money runs out,” said Ted Rossman, an analyst at CreditCards.com.
In addition, “a potential second wave is worrisome from a confidence standpoint,” Rossman added. “There is definitely some pent-up demand but it’s pretty cautious across the board.”
With states reopening but the pandemic far from over, he said, “we are in this confusing middle ground.”