According to a new report from the U.S. Department of Commerce, personal income for Americans fell by 1.1 percent in November. That was the largest decline since August and much worse than analysts anticipated. However, the headline weakness was mostly due to a sharp 8.5 percent drop in proprietors’ income related to the numerous businesses that in various regions of the country have been forced to severely limit their operations in response to the winter COVID flareup. Private-sector wages and salaries, however, actually rose last month, and in nominal dollar terms this compensation metric is already above the February (pre-pandemic) peak. At the same time the personal saving rate fell to a crisis low of 12.9 percent in November. Although well above the historical average this reading is still a significant reversal from the record 33.7 percent level seen in April, and in turn arguably an encouraging sign that the extreme financial cautiousness demonstrated by consumers earlier this year did not return with the latest uptick in the virus.
All of this also potentially bodes well for the 2020 holiday shopping season, at the very least when compared to the gloomy predictions made by many economists in the first half of the year. In fact, preliminary credit card data from Mastercard suggests that holiday retail sales excluding automotive and gasoline spending increased 3.0 percent this year compared to 2019, and the online sales component surged by 49.0 percent. Although Amazon has been a key beneficiary of the latter, any traditional brick and mortar business that has been able to facilitate online ordering and curbside, contactless pickup has likely fared a lot better this year than its competitors that failed to embrace the technological shift. The Mastercard report also revealed spending patterns consistent with what one would expect while many Americans continue to limit their commuting and general time-away-from-home. For example, apparel sales are down 19.1 percent compared to the 2019 holiday shopping season, whereas electronics and appliances spending is up 6.0 percent. Further, home furniture and furnishings sales jumped 16.2 percent compared to this same period last year, and home improvement spending similarly rose by 14.1 percent. This makes sense considering that more people are spending more time at home, but it may also suggest that a growing number of Americans are trying to get their homes ready to be put on the market in an attempt to take advantage of the rapid real estate price appreciation seen this year.
Sources: Econoday, U.S. DoC, Mastercard, FRBSL