After what’s felt like a drumbeat of bad news about rising COVID-19 caseloads and economic problems around the world, there’s finally been a few breaths of good news. U.S. and European gross domestic product are bouncing back, while U.S. consumer spending is improving as well.
The Commerce Department reported Friday (Oct. 30) that U.S. personal consumption expenditures rose 1.4 percent in September, continuing a trend that began in the summer of Americans slowly spending more money. U.S. personal income also inched up 0.9 percent during the month after falling in August.
That news follows word Thursday from the Commerce Department that U.S. GDP shot up at a record seasonally adjusted 33.1 percent annualized rate during Q3. That was faster than most economists had forecast, and a big turnaround from Q2’s 31.4 percent annualized drop, which was also a record set during the pandemic’s first wave.
And on Friday, the good U.S. GDP results were mirrored on the other side of the Atlantic as the Eurozone reported a record 12.7 percent GDP growth for the third quarter. That beat the 9.4 percent growth analysts had expected and represented and served as a big reversal from Q2’s 11.8 percent contraction.
“The Eurozone economy came roaring back in the third quarter as lockdowns ended, though a full recovery is still some way off and a setback now looms in the fourth quarter,” Claus Vistesen, economist at Pantheon Macro, said in a research note cited by CNBC.
However, there are some caveats to the apparent rebounds.
For instance, America’s 33.1 percent Q3 growth rate is an annualized number that assumes expansion will continue from one quarter to another for a full year. While that practice makes it easier to compare data over time, it’s obviously ill-suited to the COVID-19 era, where dramatic drops and sudden gains tend to muddy annualized rates. But even measuring U.S. GDP growth for Q3 alone, the figure was a very solid 7.4 percent compared to a 9 percent Q2 decline.
However, growth was uneven, with sectors like travel lagging. That’s not surprising given that PYMNTS survey data has shown that U.S. consumers are much more interested in buying things these days than they are in buying experiences, reversing the trend of the past few years.
As PYMNTS’ most recent survey shows, consumers are worried about the pandemic and looking to avoid exposure to it as much as possible. So, they’re not as interested in buying experiences like trips or concert or sporting event tickets as they once were.
The majority of those surveyed (59 percent) said the most important factor for them in deciding whether or not to go back to their pre-pandemic habits is the ready availability of a COVID-19 vaccine. Another 58 percent reported that they want to see a persistent drop in case numbers before they’re comfortable getting back out there.
It’s not that they don’t miss parts of their old lives. Dining out in restaurants was something that the survey revealed consumers are increasingly interested in getting back to, but they’re willing to wait until COVID exits the scene. But as of September, PYMNTS data found they expect that wait will be about 11 months long.
Which as it turns out, might not actually be the worst news ever. After all, a question mark hanging over this week’s good news about GDP is: “What happens now that the virus once again seems to be surging — raising the specter of more shutdowns worldwide?”
Will Round Two of COVID-19 knock back that GDP growth in Q4 or even prompt a massive contraction as the world saw in Q2? Lacking a crystal ball, we can’t say for sure, of course.
But our data indicate that GDP might not take quite the beating it did in Q2 because consumers and businesses aren’t the same as they were during Round One. Both have raised the level of their digital games, and consumers are now choosing the merchant to shop with based on the quality of their digital offerings.
And notably, this isn’t something they’re doing because they have to; they like shopping this way. Our research shows that 85.3 percent of consumers who have shifted to grocery shopping online plan to maintain at least some and possibly all of their new digital shopping habits. Only 14.7 percent plan to resume shopping in physical grocery stores.
In other words, consumers might be waiting until Fall 2021 to get back out there, but they aren’t waiting to shop. They’re doing it more on debit, they’re demanding contactless option and migrating to online channels, but they’re still shopping.
Which means that even if Q4 doesn’t live up to Q3’s big GDP growth rate, it seems it likely won’t hit Q2’s tailspin, either. That’s because digitized customers and businesses are better positioned to weather slowdowns without shutting down.
Finally, a bit of good news.