How Long Can The U.S. Spending Spree Last?

By Stefano Tromba
August 2, 2020

Americans are on a stimulus check spending spree! This comes from data by The Bureau of Economic Analysis, which reported on Friday that personal spending rose 5.6% in June.  This followed a surge of 8.5% in May. According to data from the Census Bureau people have predominantly been buying clothing and footwear. So essentially, this means we’re buying lots of stuff!

This is a sharp contrast to spending data from March and April, when the coronavirus crisis sank the economy. However, that slump is now a distant memory, thanks to money Americans received as part of the CARES Act.

Will the HEALS Act Help?

However, now things may be changing. The recent expiration of the $600 bonus in weekly unemployment checks, and stimulus checks either spent or saved in bank accounts, it’ll be hard for the spending surge to continue. That is unless Congress can agree on terms to the newly proposed HEALS Act.

That’s exactly what some experts worry about. “The federal relief programs have prevented more substantial declines in the finances of consumers, partly shielding them from the unprecedented surge in job losses, reduced work hours, and salary cuts,” said economist, Richard Curtin of the University of Michigan.

A potential pullback in spending could wind up eventually hitting the stock market, which has rallied sharply since March. Much of the economic outlook hinges on the HEALS Act passing and what benefits are part of it. “We could start to see meaningful changes in consumer behavior absent further stimulus,” states, Thomas Majewski, CEO and asset manager of Eagle Point Credit Company. He also stated that discount retailers like Walmart and Target could be vulnerable.

Final Thought

On the flipside, the housing market is still strong. Home improvement retailers such as, Lowe’s and Home Depot are near all-time highs. This a good sign demonstrating economic resiliency – but with Congress in the early stages of what will undoubtedly be heated negotiations over the HEALS Act, it’s anyone’s guess on how long it may last.

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