Lockdowns and spending

I’ve been thinking about what economic growth will look like in 2021, partly for work and partly for Good Judgment’s forecasting tournament. One question within that is how much lockdowns affect total consumer spending. Tracktherecovery.org makes it easy to explore this question.

That chart shows consumer spending and time spent outside the home for Americans, both indexed to (slightly different) late-January time periods.

In April, spending dipped even more significantly than time outside the home. Then, in late spring and through mid-summer, they recovered and plateaued in tandem.

But since about August, spending and mobility have diverged. By late fall, time outside the home was falling again but consumer spending mostly kept rising–very nearly reaching January levels in late November.

This return of consumer spending was made possible by relief from policymakers. But it also reflects adjustments across the economy: businesses are finding ways to cater to at-home consumers who in turn are finding new ways to spend from home. You can see this in the data: spending on, say, transportation is still down ~45% while retail and groceries are each up by double-digits.

The key variable in the 2021 economy will be the containment of the pandemic. But even if lockdowns continue longer into the year than many now expect, consumer spending might continue to recover and even reach new highs. At least if policymakers do their part.

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