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Consumer appetite for cars, homes bolsters US economy
‘Heroic American consumer is back’: Treasury spokesperson
Treasury Department spokesperson Monica Crowley argues President Trump’s economic growth policies, which were successful before coronavirus, will help the economy have a ‘very robust recovery’ following the pandemic.
Consumers have continued spending on big-ticket items such as vehicles and homes during the coronavirus pandemic, helping support the U.S. economy as it battles a surge in cases and renewed business shutdowns.
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Historically low interest rates are luring in auto and home buyers, many of whom have higher incomes and firmer job security than low-wage, service-sector workers hardest-hit during the recession, economists and industry experts say.
"Looking at the car sales, looking at the retail activity, looking at the housing data, it has been pointing to a really bigger recovery story, " said James Knightley, an economist at ING Groep NV. "If you've got a job and feel pretty secure and you see your equity holdings rise in value, you're probably still feeling pretty good."
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Mr. Knightley said the big-ticket purchases could weaken if the rise in coronavirus infections and dialed-back state reopenings significantly dampen employment and consumers' ability to spend. Incomes also could take a hit if the federal government doesn't continue providing expanded unemployment benefits to the millions of people still out of work because of the crisis, he added.
"I'm just growing a little bit more nervous that after this good run, we could be in for a softer set of numbers," he said.
Congress is debating whether to extend an extra $600 a week in unemployment benefits provided by the federal stimulus enacted in the spring. The aid is scheduled to expire at the end of July.
Solid spending on durable goods — typically more expensive products designed to last more than three years — differs from previous downturns, when consumers sharply pulled back on these larger purchases while continuing to spend at service-sector businesses, according to findings from a Harvard-based nonprofit research group.
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Spending on long-lasting, durable goods accounts for about 7% of gross domestic product. Outlays at service-sector businesses comprise a much larger share of economic output and were the hardest-hit businesses by the pandemic. Growth in services will need to rise much more for the U.S. to achieve a full economic recovery. In May, consumers increased their spending on services by 5.4%. A Commerce Department report due out Thursday on retail spending, which covers spending on autos but not houses, is expected to show a June increase of 5.2%, according to a Wall Street Journal survey of economists.