WSJ US BusinessConsumers Spearhead Recovery, but Data Signal Potential Change

May 7, 20220
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American consumers are at a crossroads.

In large part, they have weathered the economic storm caused by the pandemic, saved lots of money and contributed to the continuing recovery.

While wages have continued to grow at a strong pace and household spending rose 1.1% in March, some signals are pointing toward a potential shift in how—and how much—Americans will spend in coming months, hinting at cracks in the economy’s main driver.

Restaurants have recovered, just not everywhere

The number of people dining out has returned to prepandemic levels nationally, according to data from the table-booking service OpenTable. But in markets such as New York, Chicago, Seattle and San Francisco, there is still a long way to go. And a sharp rise in menu prices isn’t helping to lure diners back.

People dining in restaurants, percentage difference from prepandemic levels

Cincinnati

Los Angeles

Minneapolis

San Francisco

Washington

Source: WSJ analysis of OpenTable data

Americans aren’t saving money as they were earlier in the pandemic

One unexpected outcome of the pandemic was that people saved money like never before. A combination of factors—including federal stimulus checks, extended and enhanced unemployment benefits and shutdowns—meant people weren’t spending money on things such as restaurants, entertainment and travel.

The U.S. personal saving rate reached a record high of 33.8% in April 2020, shattering the previous record of 17.3% in May 1975. That trend has now reversed, and the rate has fallen to its lowest level in nearly a decade.

One important reason is that inflation is outstripping wage growth, causing some Americans to dip into savings to pay for goods and services.

Personal saving rate

APRIL 2020

33.8%

All-time high

RECESSIONS

MAY 1975

17.3%

Previous high

MARCH 2022

6.2%

Lowest

since 2013

Source: Commerce Department

Personal saving rate

APRIL 2020

33.8%

All-time high

RECESSIONS

MAY 1975

17.3%

Previous high

MARCH 2022

6.2%

Lowest

since 2013

Source: Commerce Department

Personal saving rate

APRIL 2020

33.8%

All-time high

RECESSIONS

MAY 1975

17.3%

Previous high

MARCH 2022

6.2%

Lowest

since 2013

Source: Commerce Department

Personal saving rate

APRIL 2020

33.8%

All-time high

RECESSIONS

MAY 1975

17.3%

Previous high

MARCH 2022

6.2%

Lowest

since 2013

Source: Commerce Department

Personal saving rate

APRIL 2020

33.8%

All-time high

RECESSIONS

MAY 1975

17.3%

Previous high

MARCH 2022

6.2%

Lowest

since 2013

Source: Commerce Department

Households have struggled with inflation, and now they face higher interest rates

The Federal Reserve’s move this past week to raise interest rates by a half-percentage point—the largest increase since 2000—is meant to curb decades-high inflation and could be followed by more rate hikes. Fast-rising prices and the Fed’s attempts to combat them will continue to affect Americans’ finances.

“Inflation is much too high,” Fed Chairman Jerome Powell said Wednesday. “And we understand the hardship it is causing, and we’re moving expeditiously to bring it back down.”

Monetary tightening can add pressure to consumers already struggling with high prices. Rates on savings accounts should rise slightly with the Fed’s rate, but those changes could take time.

Higher rates also mean rising annual percentage rates on credit cards, making it harder for people to buy things and pay later. The same goes for auto loans and mortgage rates, which are already at their highest levels in years.

A full recovery in air travel might need to wait longer

The number of travelers on commercial airlines has gradually increased since the bottom fell out in March 2020, but the volume still isn’t what it was before the pandemic. While Americans are returning to the skies, a rapid boost in airline fares could crimp planning for long trips.

Dealing With Inflation

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