Wednesday got started with some sobering news about the state of this economy, courtesy of the Commerce Department. Consumer spending fell nearly half a percent last month. That’s the first time it’s fallen since April, back in the early days of the pandemic.
That’s not terribly surprising, given that at the same time, personal income also fell by a little over 1%.
That’s the third decline in four months, and there’s no mystery here, either — government aid has been keeping millions of people afloat and government aid is running out. So what does that really mean going forward?
This time of year is normally when people spend more money.
Carl Tannenbaum, chief economist at Northern Trust, said the fact that personal income and consumer spending dropped in November is a bad omen.
“It does give a pretty good sense that households are not going into the new year in very strong shape, and adds to the urgency around the negotiations in Washington,” he said.
Consumer spending crashed in March and April, but then bounced most of the way back largely thanks to government aid.
“Back in April, after the CARES Act, there was a huge pop in personal income,” said Ted Rossman, an industry analyst at CreditCards.com. “And a lot of that did trickle down to other sectors of the economy.”
He said over the summer, a lot of people felt like things were getting better. But now?
“Maybe those unemployment checks have dried up, they’ve long since spent their first stimulus check. Maybe they’re not able to go back to work,” Rossman said.
And people are nervous after months of uncertainty over whether the federal government would provide more relief, said Tim Quinlan, senior economist at Wells Fargo.
“It takes a long time to build up consumer confidence and not so long to disrupt it or to shake it,” he said.
And when people have less confidence and income, they’re less likely to spend their money. Tannenbaum at Northern Trust said that is a bad combination.
“The spending done by households accounts for almost 70% of our annual gross domestic product, our national income,” he said.
And if it’s not recovering, Tannenbaum said, neither will the economy.
Which essential workers should be prioritized for vaccines?
Front-line health care workers and residents of long-term care facilities are getting the shots first, according to Centers for Disease Control and Prevention guidance. Essential workers will be considered next, but with limited vaccine doses and a lot of workers considered essential, the jockeying has already started over which ones should go to the front of the line: meatpacking workers, pilots, bankers and ride-share drivers among them. The CDC will continue to consider how to best distribute the vaccine, but ultimately it’s up to each state to decide who gets the shots when.
Could relaxing patents help poorer countries get vaccines faster?
The world’s poorest countries may not be able to get any vaccine at all until 2024, by one estimate. To deliver vaccines to the world’s poor sooner that, some global health activists want to waive intellectual property protections on vaccines, medicines and diagnostics. India, South Africa and Kenya have asked the World Trade Organization to allow pharmaceutical plants in the developing world to manufacture patented drugs without having to worry about lawsuits. The United States, Britain and the European Union, have repeatedly rejected the proposal at the WTO.
The Pfizer vaccine has to be kept in extreme cold at minus 94 degrees Fahrenheit. And keeping it that cold requires dry ice. Where does that dry ice come from?
Also, is there enough of it to go around? And how much is it going to cost? The demand for dry ice is about to spike, and a whole bunch of industries are worried. Now, dry ice sells for $1 to $3 a pound. While the vaccine gets priority, smaller businesses and nonessential industries may end up losing out.
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