Coronavirus Economy: What Are Americans Buying And How Are They Paying For It?

Consumers pulled back spending in April, the first full month of coronavirus lockdowns across most of the country, with outlays falling a record 16.4% from March, the Census Bureau reported Friday. Credit card use took an even greater hit, down 40%, compared to last year, a report from the JPMorgan Chase Institute indicated.

At the same time, a Bankrate.com survey indicated people are using their credit cards more for food purchases.

Census reported retail sales were off 15.1% from March and 17.8% from a year ago, with clothing and accessories stores taking a massive 89.3% hit compared to April 2019 levels. Sales among nonstore retailers were up 21.6%.

JPMorgan Chase reported credit card use was steady for the first 12 days of March but then took a steep plunge when a national emergency was declared, with charges $300 lower a week last month than in April 2019.

Higher income households cut spending by more than lower-income households. Those making the most money reduced spending by 46% or $400 in the second week of April – likely because there were fewer nonessential businesses at which to spend.

“The timing of the spending drop mirrors the spread of the virus and staggered national implementation of government social distancing orders,” the report said, adding, “The drop in spending also closely tracks the pattern of initial job losses. [Unemployment insurance] claims began spiking in the third week of March, with more than 20 million … claims filed by April 11. This raises the question as to how much of the 40 percent drop in credit card spending is due to the pandemic itself, the social distancing policies or income losses.”

The report found spending on essentials spiked 20% initially before falling below prepandemic levels. Spending in nonessential categories dropped by half.

Data from Discover indicate overall credit charges were down 29% in April but charges for groceries were up 16%. Charges for prepared food and food preparation kits also were higher.

“Americans may not have the available funds to pay right now, so they’re financing these purchases with credit,” Bankrate.com analyst Ted Rossman said. “That also fits with another recent CreditCards.com survey, which found 28 million Americans added to their credit card debt over the past two months.”