More Americans Are Moving Back to Pre-Pandemic Life — How Will It Affect Spending?
There’s no doubt that Americans are anxious to return to life the way it was before the COVID-19 pandemic — including the way they spend money. At least one new survey suggests many are doing just that. Even so, most consumers remain cautious about spending, and the Delta variant could throw even more caution into the mix.
The second-quarter State of Personal Finance Study, a survey of 1,004 U.S. adults conducted by Ramsey Solutions in June and released on Monday, found that nearly six in 10 respondents are returning to pre-pandemic norms and are ready to spend money on something other than essentials. But more than 80% said that while life is returning to normal, their old spending habits might not.
“Americans haven’t forgotten the money lessons they learned during the COVID-19 pandemic,” the study said. “Many Americans who reined in spending and ratcheted up savings to ride out the pandemic say some of those habits are here to stay.”
Sixty-three percent of the survey respondents said they had big-ticket purchases planned for the current quarter, with over 27% of those saying the purchase will involve summer travel.
Meanwhile, Mastercard CFO Sachin Mehra recently offered a bullish take on U.S. consumer spending, saying it is on pace to exceed pre-pandemic levels based on data from the company’s second-quarter earnings report.
“People are looking to spend and they are exercising that intent right now,” Mehra told CNBC. “Does the stimulus play a part in that? Absolutely. Does the high level of savings which are there across the board play a part in that? Totally. At the end of the day, people are exercising their intent to spend.”
The wild card is how the Delta variant will impact overall consumer spending. Some economists say the variant has already caused a slowdown in some sectors of the economy.
As The New York Times reported last week, Chase credit card spending in certain travel and entertainment categories has fallen recently because of the variant, according to a JPMorgan research report from senior economist Jesse Edgerton and economist Peter McCrory. Chase card spending data shows that airline spending has fallen nearly 20% from a mid-July peak, the report said.
One thing to keep an eye on moving forward is how the child tax credit will impact spending. According to the Ramsey Solutions study, 70% of qualifying parents say they are afraid to spend monthly tax credit payments because of uncertainty over how it will affect their income taxes next year.
Recent changes to the child tax credit allowed eligible parents to get half of the credit in monthly payments from July through December, in sums of $250 a month per qualifying child between the ages of six and 17 and $300 a month per qualifying child under the age of six. Parents can claim the rest of their credit when they file their 2021 taxes next year.
But as the Ramsey study noted, only half of qualifying parents said they “clearly understand” what the credit means in terms of their tax obligations. Families that have already received the payment are split on what to do with the money. Thirty-eight percent of qualifying parents said they will save the payments, 35% said they will pay bills with them, 28% said they will invest the payments for their child’s future and 27% said they will spend the payments on necessities.
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