As Restrictions are Lifted, Consumer Spending Has Shifted From Retail to Services

By Emma Nitzsche

The most significant source of economic demand in the U.S., consumer spending, soared 4.2 percent after surging in March.

But not every industry is cashing out in the post-pandemic spending spree.

The Commerce Department reported a 1.3 percent drop in retail sales for May. In addition, the report showed consumers were purchasing less furniture, electronics, and building materials than in the previous month. Americans bought these items in mass quantities during the pandemic, but now that restrictions are loosening, consumers would rather spend money on services and experiences.

Despite widespread labor shortages, spending at restaurants and bars rose 1.8 percent. Sales had risen 70.6 percent from last year when many restaurants practiced social distancing and limited in-person dining.

Additionally, spending at casinos rose nearly 17% compared to last month, while consumers spent 9% more at theme parks and indoor entertainment centers, including bowling alleys, according to Earnest Research.

With more customers preparing to return to work, clothing sales increased by 200 percent from May 2020. However, overall online sales dropped significantly, with more consumers willing to purchase their favorite items in the store instead.

The higher spending is a result of rising vaccination rates, limited restrictions, and ample household savings. A survey released by MassMutual showed that more than 1 in 5 Americans say that they have saved at least $1,000 during the pandemic. In addition, the survey found that limited travel and a lack of nightlife activities were the most significant factors in saving that money.

Now consumers are free to return to their previous spending habits. As restrictions begin to fall, Americans are less likely to spend money on things they could have purchased at home during the pandemic.

Electronics and appliance stores lost 3.4 percent, and gardening equipment dropped 5.9 percent. In addition, despite the high demand for new and used cars, the national automobile chip shortage caused motor vehicle spending to fall 3.7 percent.

While consumer spending is expected to grow substantially over the next few months, the pace will most likely return to normal after individuals have exhausted their savings built up from months of staying inside.