Orignally published on 2021-12-08 11:55:00 by www.marketwatch.com
The COVID-19 pandemic is still very much around, but from an economic perspective it’s having a smaller and smaller impact on everyday lives. Gone are the days where most every store was closed, though mask and vaccine mandates still remain, and supply-chain issues are keeping some products off the shelves.
The disruptions that prevented spending, as well as the unprecedented government response in the form of extra unemployment checks and direct stimulus checks, have transformed the balance sheet of the U.S. consumer.
In a note to clients, Michael Tran, commodity and digital intelligence strategist at RBC Capital Markets, calculates by just how much: $9,500. And that nest egg will allow an incredible -10.8% savings rate for all of 2022. That is, the typical household can spend their entire paycheck, and 10.8% more. Put another way, the typical household will have, on average, another $679 to spend every month. “The bottom line is that total expenditures remain elevated and are showing little signs of abating, and household balance sheets are strong enough to absorb a considerable amount of continued spending,” says Tran.
That saving also has meant that goods spending isn’t cannibalizing services expenditure. Spending at home-improvement stores, for instance, has remained elevated, even as they’re no longer one of the few shopping destinations that are open.
He does draw a contrast between the strength of the U.S. consumer balance sheet and rather miserable consumer sentiment. “It seems that consumers recognize the difficulty of the current environment and are participating anyways. A key question (with the most important read-throughs for major inflationary issues) is if consumers are buying now predominantly under the assumption that prices will be higher later,” he says.
The one area where foot traffic is strong but sales haven’t followed is with vehicle sales. “This means that either interested consumers are being priced out of the market and there are fewer sales per customer visit, or supply-chain issues continue to hinder the time between purchase, delivery and registration, or both,” says Tran.
The omicron variant of coronavirus can partially evade the protection from vaccines, according to laboratory tests conducted in South Africa. “The vaccine takes a hit but it is not a completely different ballgame,” said Alex Sigal, the virologist who led the study.
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