U.S. Consumers Spending Despite Low Confidence

Despite falling consumer confidence numbers amid the recent rise in COVID-19 infections, U.S. shoppers are continuing to spend, says the National Retail Federation (NRF). “With consumer spending accounting for roughly two-thirds of U.S. gross domestic product, all eyes are closely watching shoppers’ ability to drive the economy,” says Jack Kleinhenz, NRF chief economist. “If consumer finances are any indication, there’s reason to be optimistic: households remain in good shape, with consumers in the aggregate actually underspending relative to current income. Even though enhanced unemployment benefits have expired and are no longer providing a boost to personal income, the loss is easily offset by the savings stockpiled since the coronavirus pandemic began.” In mid-September, the U.S. Department of Commerce lowered its forecast for gross domestic product growth for the year to 5.9 percent from seven per cent, and the agency expects unemployment to end the year at 4.8 per cent rather than 4.4 per cent. Inflation was up 5.2 per cent year-over-year in August, fuelled by consumer demand and supply chain disruptions. Despite all that, August retail sales as calculated by NRF rose sharply, up 2.3 per cent month-over-month and 12 per cent year-over-year. That brought the first eight months of the year to a 15 per cent year-over-year gain and on track to meet NRF’s forecast of between 10.5 and 13.5 per cent growth for the full year, showing a big disconnect between consumer confidence and consumer spend.