Snapshot: Consumer Spending Patterns Have Changed

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When lockdowns hit during the pandemic, they changed consumer spending patterns overnight. Between February and May 2020, the share of spending on services rather than goods dropped three percentage points (a significant reduction). Services like recreation, transportation, and food and accommodations, which require in-person contact, were severely disrupted, while goods categories like food and beverages, furnishings, and recreational goods experienced a boom, in part due to government stimulus programs and strong household income growth.

Fast forward to today and the services share of total spending has partially rebounded and stabilized – but still well below the pre-pandemic trend. Our colleagues in Goldman Sachs Investment Research recently provided their insights on whether or not the recent imbalance between services and goods spending is likely to persist.

They believe the imbalance is largely driven by strong consumer finances coupled with the persistent shift to working from home, which has led households to reallocate their spending budgets. Three pieces of evidence support the important role of work-from-home in changing spending patterns:

  • Spending on office-adjacent services – such as personal care, clothing and ground transportation – has shrunk more than spending on leisure-related services – such as movies, live entertainment and restaurants.
  • Goods with the most elevated spending are often close substitutes for out-of-home services that have seen reduced consumer spending shares. For example, electronics and communication goods could replace certain commuting costs; personal care products substitute for personal care services; and recreational items may replace outdoor leisure activity services.
  • Metro-level credit-card spending data shows that each 1% increase in the work-from-home rate is associated with a 0.2% increase in goods spending and a 0.8-1.4% reduction in spending on in-person services and transportation.

So, has the goods-to-services rebalancing gone as far as it’s going to go for now? Our Research colleagues believe a full return to pre-pandemic spending patterns would require a reduction of 5-8% in the work-from-home rate. However, the work-from-home rate has stabilized at 22% over the past two years even as labor market conditions have eased. Even if easing labor conditions ultimately decrease the demand for remote workers, which seems likely, the share of work done remotely may adjust very gradually. And this suggests the shift in spending patterns is likely here to stay for the foreseeable future.

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this website were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions.