The surge in COVID-19 infections and restrictions in December dampened the engine of the U.S. economy – consumer spending – for the second month in a row.
Restrictions that undermine business designed to contain the spiral of COVID-19 infections dampened the engine of the U.S. economy in December, as consumers kept their wallets closed and curled up at home.
Consumer spending, which powers about two-thirds of U.S. economic growth, fell $ 27.9 billion or 0.2% in December, marking the second consecutive month of decline, the U.S. Department of Commerce said on Friday. .
In November, consumer spending fell 0.7%.
Friday’s data adds to a growing list of indicators that show the U.S. economic recovery slowed significantly in December as the pandemic raised new challenges for shopping, dining and travel – all industries particularly affected by COVID-19.
U.S. gross domestic product (GDP) – which measures the total production of goods and services in the economy – grew 4% lower than expected on an annualized basis in the last three months of 2020, the department said on Thursday. Trade.
For the year, the US economy contracted 3.5% in 2020 – the worst GDP drop since 1946.
The economy lost 140,000 jobs in December, putting an end to seven consecutive months of job creation. Layoffs remain widespread, with some 847,000 Americans claiming unemployment benefits from states last week.
Federal Reserve Chairman Jerome Powell on Wednesday explicitly linked the progress of coronavirus vaccination campaigns to the return of the economy to full health.
“There is nothing more important to the economy than getting people vaccinated,” said Powell, adding that he had received a COVID-19 vaccine and that he expects to receive a second soon. .
Many economists expect the economy to pick up later this year, with the hopes that immunization campaigns and a new round of Congressional virus relief will hasten the return to business as usual.
US President Joe Biden has proposed his US bailout – a massive new $ 1.9 trillion stimulus package to speed up the country’s vaccination campaign and give more financial assistance to struggling households, small businesses and to low-income and minority communities who have borne the brunt of the economic fallout from the pandemic.
Many analysts expect the horse-trading between Democrats and Republicans in Congress to lower that price, but still see a significant boost in the cards.
“We assume that a $ 1.3 billion fiscal stimulus package will emerge from the announced $ 1.9 billion PRA, delivering an almost immediate $ 1 billion increase in disposable income of households – families at home. low to middle income benefiting from a new round of checks, increasing unemployment. benefits and other measures, ”Oxford Economics wrote in a note to clients.