More Consumers Are ‘Revenge Spending’ Their Stimulus Checks

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As the economy ramps up and new stimulus checks are being doled out, “revenge spending” is on the rise. 

See: Americans Are Ready to Travel Again — Here’s How Much They Plan to Spend on Vacations This Year
Find: Over Half of Americans Need $1,400 Stimulus to Pay Basic Expenses

Increased spending for luxury purchases on status-brand handbags, belts and footwear has been fueled by the latest round of stimulus payments sent out by the Biden administration.  

In a conversation with CNBC, consumer savings expert Andrea Woroch said, “The stimulus check feels like free money … People have the urge to go out and splurge on themselves, almost as a reward for being locked down over the past year.” The term for this consumer behavior is revenge spending.

One reason for it could be the shift to primarily online shopping during the pandemic. According to Green Book, 58% of stimulus check recipients will primarily spend the money online, and 48% said it’s because they got used to shopping online during COVID-19.

See: 30 Ways Shopping Will Never Be the Same After the Coronavirus
Find: 62% of College Students Plan to Save or Invest Their Stimulus — Is That Good or Bad for the Economy?

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A McKinsey & Company study on the change in consumer behaviors during COVID also highlighted the surge in e-commerce. Although this recent surge in high-end goods is a positive sign for the luxury market, the sector was amongst some of the most hard-hit during the early days of the pandemic.

McKinsey reported in April of last year that “more than 40% of global luxury-goods production happens in Italy — and all the Italian factories, including small, family-based faconniers, have been temporarily shut down.” 

See: How COVID-19 Has Transformed the Way We Spend
Find: How the Pandemic Has Changed Online Businesses, According to an E-Commerce Expert

However, industry insiders and economists have optimistic views for the year ahead. National Retail Federation president and CEO Matthew Shay told NBC News, “We remain optimistic that retail will help facilitate a surge in spending, job growth and capital investment.” The trade group forecasts that sales will increase by as much as 8.2% compared to last year, up to $4.4 trillion of economic activity, NBC News reports.

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McKinsey predicts that this surge in discretionary spending will likely decrease as COVID tapers off and consumers will start spending more on things like domestic travel and entertainment.

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About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 

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