Surprise! Much of the Stimulus Money Went into Savings Accounts, Yet the Consumer Keep Spending

Surprise! Much of the Stimulus Money Went into Savings Accounts, Yet the Consumer Keep Spending

#consumer #stimulus #retail #spending #Fed #PresidentTrump

$DIA $SPY $QQQ $RUTX $VXX

Surprise, consumers saved 36% of their stimulus checks and kept on spending.” –Paul Ebeling

As emergency aid/relief/stimulus programs for American consumers expired The People kept spending. Friday’s September retail sales report confirmed it.

The government data told us that consumers put much of their stimulus money away and have recently been drawing from those savings.

Data released this week confirms that consumers are very aware of what they do.

The New York Fed surveyed 1,200 households and asked what they did with their economic impact payments, which included $1,200 checks for qualifying adults and an additional $500 per child.

Of the aid/relief/stimulus money that went out, 29% was spent, 35% was used to pay down debt, and 36% was put away in savings.

How consumers used their stimulus checks. (NY Fed)
How consumers used their stimulus checks. (NY Fed)

In August, the New York Fed did another survey asking what consumers would do with a potential 2nd round of aid/relief/stimulus checks.

Then respondents said they would spend 24% of it, about 14% on essential items and about 7% on non-essential items. Those respondents also said 31% would be used to pay down debt while 45% would be saved.

A more recent survey shows consumers are even less likely to spend a future stimulus check. (NY Fed)
A more recent survey shows consumers are even less likely to spend a future stimulus check. (NY Fed)

The conclusions

This propensity to pay down debt and save says some spending is pent up, and a vaccinated population will open up spending.

So, a lot of potential consumer spending sitting in personal checking accounts and smaller-than-usual credit card balances just now. And to unlock that cash, consumer confidence must improve and Americans need to feel it is safe to return to the leisure activities damaged by The China Act of War Virus chaos.

And, since consumer spending is what gins up the economy, then the next round of aid/relief/stimulus may be different from what has been given so far.

From a public policy POV, the likely extended period of unemployment augurs for additional fiscal support, but if much of the rebates and payments are being saved, President Trump should be considering more targeted support or aid that we know will be all spent.

It is good news that the 72% consumer driven US economy dive off a fiscal cliff, the economy though strong and growing is not fully recovered yet.

With post-virus normalcy not expected till mid-2021, we have to look forward to some thoughtful stimulus as consumers continue to draw from their savings.

Friday, the benchmark indexes finished flat to unchanged at: DJIA +112.11 at 28606.25, NAS Comp -42.32 to 11671.48, S&P 500 +0.47 at 3483.81

Volume: Trade in the NYSE came in at 888-M/shares exchanged.

HeffX-LTN’s overall technical analysis for the US benchmark indexes is Bullish with a Very Bullish bias at the week ended 16 October 2020.

  • NAS Comp +30.1% YTD
  • S&P 500 +7.8% YTD
  • DJIA +0.2% YTD
  • Russell 2000 -2.1% YTD

Looking Ahead: Investors will receive the NAHB Housing Market Index for October Monday

Have a healthy weekend, Keep the Faith!

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Paul Ebeling

Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he it the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.