Americans continued to spend less in December, a sign that the economic effects of COVID-19 could not be ignored during the holiday season.
U.S. households cut spending in December for the second consecutive month, during a season that is typically characterized by its robust holiday shopping and mega sales. Personal consumption expenditures (PCE) decreased by $27.9 billion, or 0.2%, last month, according to the Bureau of Economic Analysis.
Americans spent less on dining, traveling, and health care in December. They also purchased less food and beverages from supermarkets and liquor stores. Sales at retailers declined for three straight months. However, consumers purchased more motor vehicles and parts, specifically new light trucks, and increased spending on household utilities like electricity, offsetting the decline.
The decrease in spending comes as the U.S. faces a second wave of COVID-19 cases amid colder weather and relaxed social distancing practices. The U.S. reported 25.8 million total cases and 433,000 deaths as of Jan. 29.
At the same time, the job market is struggling, with nearly 10 million jobs still lost since the beginning of the pandemic. About 140,000 jobs were lost in December as layoffs mounted in the services sector of the economy.
However, the decrease in spending was in contrast to the $116.6 billion, or 0.6%, increase in personal income last month. This was primarily due to increases in pandemic unemployment compensation, and wages and salaries in service-producing industries. With Biden’s proposed $1.9 trillion stimulus package, perhaps personal income and, in turn, PCE will improve later in the year.
Future economic growth is dependent on how widespread potential business shutdowns are and how quickly vaccine distribution and development can be rolled out. So far, 26.2 million vaccines were administered in the U.S., according to the CDC. Novavax and Johnson & Johnson both released Phase 3 data for their vaccine candidates, which showed 89.3% and 85% efficacy, respectively. If approved by the FDA, there will be four vaccines available to U.S. residents, alongside those manufactured by Pfizer and Moderna.