The pandemic led consumers to spend more on goods, less on services
The pandemic has forced countless businesses to close. As a partial result, consumers spent more on goods and less on services in 2020 than in the previous year. Over the four quarters of 2020, spending on durable goods, which includes motor vehicles and household furnishings, grew by almost 12 percent. Services, which account for around two-thirds of consumption, fell by 6.8 percent, causing total consumption to decrease.
With higher disposable income, fueled by expanded government benefits and lower borrowing costs, many households could afford bigger-ticket purchases. At the same time, the increased risk of face-to-face interactions and the implementation of remote working arrangements caused households to spend less on tourism, restaurant meals and other services, and more on goods, like groceries.
This PIIE Chart was adapted from Jason Furman and Wilson Powell III’s blog post, “What the US GDP data tell us about 2020.”