BlackRock Investment Institute

Macro insights

U.S. consumption restart underway

U.S. consumption is continuing to rebound, albeit at a slower pace than during the unprecedented growth in the first half of the year. We expect consumption to fully restart, even if the timing may be delayed by the virus dynamics – fueling a return of GDP to pre-Covid trend by the end of the year.

Sector spending

Chart showing recreation and transport spending still below pre-covid levels

urces: BlackRock Investment Institute and U.S. Bureau of Labor Statistics, with data from Haver Analytics, September 2021. Notes: The bars show the level of nominal consumption spending on different categories of goods and services expressed relative to the level of spending in February 2020. A negative reading denotes spending below the Feb 2020 level and a positive reading indicates spending higher than that level. The width of bars denotes the share of that category of spending in total consumer spending. Healthcare accounts for nearly 18% of the spending and is 0.3% below pre-Covid levels.

Some of the biggest gains in spending have been in contact intense services such as transport and recreation, according to the latest U.S. personal income and outlays data. Yet there is still a sizable shortfall compared to pre-Covid levels. See the chart. That said, real services spending as a whole is now within 3% of its pre-Covid level. Together with this year’s surge in goods consumption, overall spending is now over 2.5% above the pre-Covid high watermark.

As the labor market continues to improve, we are likely to see savings rate normalizing from high levels and consumers starting to draw on excess savings accumulated during lockdown. Both these factors will support sustained consumption growth and drive GDP to pre-Covid trend by the end of the year, in our view.

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Elga Bartsch
Head of Macro Research
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Nicholas Fawcett
Macro Research

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