U.S. Retail Spending Jumps, Coincident With Federal Relief Payments
ARI SHAPIRO, HOST:
After three months of pandemic penny-pinching, U.S. consumers went on a shopping spree last month. Retail sales jumped more than 5% in January. That's much more than forecasters had expected. The sales boom was fueled in part by those $600 relief payments that the federal government sent out to many Americans at the beginning of last month. President Biden now wants Congress to authorize additional payments of $1,400. NPR's Scott Horsley joins us now.
SCOTT HORSLEY, BYLINE: Hi, Ari.
SHAPIRO: This was a major turnaround for retailers after a pretty slow holiday shopping season. What happened?
HORSLEY: Yeah, it was a big turnaround. Sales had really slumped in October, November and December as the pandemic surged. But even though the virus was still circulating last month, people really opened their pocketbooks. And chief economist Jack Kleinhenz of the National Retail Federation says that helped make up for some of the lost ground in previous months.
JACK KLEINHENZ: Don't underestimate the consumers, what I can tell you. Today's report was much better than expected. In many ways, it was remarkable because it was widespread across so many categories of retail.
HORSLEY: It was really broad based. People spent money last month at long-neglected department stores. They bought furniture and electronics. Even bars and restaurants, which have been hit so hard by the pandemic, got a sales bump compared to December, although restaurant sales are still way below their pre-pandemic levels.
SHAPIRO: So how big of a factor were those relief payment checks that started landing in people's bank accounts in early January?
HORSLEY: They were a big factor for some consumers, especially those in lower-income households. I spoke with Jonathan Silver, who runs a company called Affinity Solutions that tracks credit and debit card spending by about 90 million people. And it's very clear in his data that as soon as the relief payments hit people's bank accounts around the 4 of January, there was an immediate burst of spending by families on the lower rungs of the income ladder.
JONATHAN SILVER: The lower-income folks, the money is really burning a hole in their pocket and they're going out and spending it very quickly, whereas people that were over that income threshold were largely banking it, maybe paying down debt.
HORSLEY: There's a group of Harvard economists who've been parsing Silver's data. They estimate families with the household income of less than $46,000 immediately spent a lot of their relief payment. And then as the month went on, their spending tapered off. By contrast, families making upwards of $78,000 spent only about 45 of the $600 they got from the government. And by the way, Ari, that's very different from what happened early in the pandemic, when the government sent $1,200 checks out to a lot of people. Back then, you saw much more of the money was spent by families at every income level. Of course, back then, we had about twice as many people who were out of work across a much larger swath of the U.S. economy.
SHAPIRO: And so now Congress is thinking about sending people another $1,400 as part of the president's $1.9 trillion rescue plan. And based on what you're saying, it sounds like some families could really use that money and others maybe not as much. What does the data suggest?
HORSLEY: Yeah. It tells us once again how unevenly this pandemic is being felt. You know, for people who've lost jobs or who are working in lower-wage jobs, that extra $1,400 could be a real lifeline. And you can see that in how quickly they spent the $600 they got last month. But the Biden plan would also send money to a lot of upper-income families. You know, a childless couple, for example, making $1,500 would get 2,800 bucks. And the data suggests for a lot of higher income families that money might just pad their bank account. So how the relief is targeted is certainly something for lawmakers to think about.
SHAPIRO: NPR's Scott Horsley, thanks a lot.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.