March 24, 2021

COVID-19 stimulus payments boost savings rather than spending

by Jharonne Martis.

The U.S. government is sending out another round of checks meant to stimulate economic activity during the coronavirus pandemic. Eighty percent of U.S. recipients plan to: save the money (48%), or pay off their debts (32%), Refinitiv discovered in a collaboration with Maru Public Opinion (Exhibit 1). About one in five (20%) of Americans will either spend it (15%), while the remaining 5% will invest the funds.

Exhibit 1: How Americans Plan to Use Their Stimulus Check

Source: Maru Public Opinion

Rising personal savings

Nearly half of Americans (48%) receiving a check in the latest round of stimulus plan to save the money. Personal savings rates are up, according to the U.S. Bureau of Economic Analysis.

This economic indicator was 7.6% at the beginning of 2020, then skyrocketed to new highs at 33.7% in April 2020 during the pandemic.

The savings rate dropped as consumers gradually increased spending during the summer of 2020 and into Amazon Prime Day. However, when another round of stimulus checks were sent out in January, the personal savings rate spiked again to 20.5%. This suggests that Americans are still concerned about the pandemic and perhaps building up their emergency funds.

Traditionally, the personal savings rate rises during economic downturns. This was also seen during the global Great Recession (December 2007 – June 2009), when several financial institutions fell and consumers were worried about job security.

Exhibit 2: U.S. Personal Savings Rate

Source: Refinitiv Datastream

Spending the stimulus check

The survey also shows that those who plan to spend their stimulus money intend to use it mainly for groceries, and put funds toward basic living expenses, including electricity bills (Exhibit 3). Refinitiv discovered this in a collaboration with Maru Public Opinion, a panel and data service insight firm. The findings and detailed tables can be found here:

Exhibit 3: Spending Plans for Stimulus Money

Source: Maru Public Opinion

Accordingly, Kroger is expected to see a 27.6% growth in sales from the holiday season as consumers are not eating out as much, quarantined and cooking from home (Exhibit 4).  Survey respondents also plan to continue doing home renovations. Consumers moved or bought new houses during the pandemic and continue to invest in improving their households. Consequently, Lowe’s and Home Depot continue to see sales growth from the previous quarter of 12.9% and 4.9%, respectively.

Exhibit 4: Revenue Growth: Q4 2020 vs. Q1 2021

Source: Refinitiv I/B/E/S

The survey also shows that those who plan to spend their stimulus check will purchase consumer goods such as clothing, shoes, electronics, furniture and toys. When looking at revenue forecasts for the first quarter ending April 2021, Refinitiv data shows that the names below will see an improvement in revenue in Q1 2021 compared to Q4 2020, when holiday sales were robust (Exhibit 5).

The textiles, apparel and luxury goods sectors have been struggling the most during the pandemic. Still, within this group, footwear is expected to see the strongest sales. The pandemic has shifted shoppers’ preferences towards comfort vs. fashion. Therefore, footwear makers Wolverine World Wide and Crocs are expected to see a rise in sales from the previous quarter (Exhibit 5). Crocs is also expected to see a 56.7% jump in Same Store Sales for Q1 2021.

When it comes to eating out, Blooming Brands Inc. and Chipotle continue to knock it out of the park. Within leisure products, Callaway Golf is expected to see the biggest improvement in sales from the previous quarter with a robust 52.4% growth (Exhibit 5). The pandemic has also brought a lot of traffic to eBay as many sell goods to declutter their homes and others find an extra source of income.

Exhibit 5: Revenue Growth: Q4 2020 vs. Q1 2021

Source: Refinitiv I/B/E/S

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