There have been many strange economic figures in the last 14 months as the world has been obscured by the epidemic. But one line of GDP figures for the first quarter, published on Thursday, stands out even more.
Americans’ spending on household goods, such as cars, furniture and other long-awaited goods, rose by a staggering 41.4% in the first three months of the year. Enjoy your Pelotons և Big Green Eggs, everyone!
The central reality of the economy is 2021. That is, it is deeply unbalanced across sectors, unbalanced by the forces that have huge long-term consequences for businesses and employees.
The economy is recovering rapidly, reaching the levels of total GDP that were expected before anyone heard of COVID-19. But that disguises some of the extreme shifts that the United States is making. This is possible both for businesses that have lost that shift and for those employees who may need to find their way to growing industries.
In times of turmoil, it helps to look at GDP figures not in terms of how they changed in the previous quarter or the previous year, but in terms of the pre-epidemic economy. How does the real number of the first quarter compare to what it would be if it grew at a stable 2% annual interest rate from the end of 2019 to the last quarter, which does not affect the epidemic?
This approach confirms the basic idea that the economy is not far from this epidemic trend. In the first quarter, GDP as a whole was only 3.3% lower than it would have been in that hypothetical world without an epidemic. The United States is on track to reverse its current trend for the second quarter of 2019.
But as the extreme growth of the first quarter figures reflected, there was a huge redistribution of economic activity to domestic goods. Expenditures on cars and trucks are 15.1% higher than they would be on the 2019 trajectory, expenditures on furniture and household appliances are 16.6% higher, and expenditures on leisure goods are 26% higher.
Overall, the cost of household goods is $ 348.5 billion a year higher than it would be in this alternative space, as Americans have spent their stimulus checks և unused travel on physical goods.
The housing sector is experiencing almost the same wave. Housing investment was 14.4% higher than its pre-epidemic trend of $ 90 billion a year in additional activity. And that, of course, was hampered by the scarcity of houses for sale, the timber used to make them, and other materials. It is going to soar even more in the coming months, based on prospective data such as housing.
Another highlight is the business investment in IT. The technology sector has not been relatively out of the crisis. Expenditures on information processing equipment in the first quarter were 23% higher than its pre-epidemic trend, and investments in software were 7.4% higher.
Then there are the losers.
The problems of the service industry, especially those related to travel, are well documented. Although spending on restaurants, airline tickets, concerts, and other leisure activities increased in the first quarter, it was a much smaller wave than a physical one, չէր almost not large enough to fill the deep gap in those areas. Expenditures on transportation services remain 23% lower than their pre-epidemic trend, leisure services on 31%, and restaurants and hotels on 19%.
These three sectors alone are an economic “absence” of $ 430 billion. Mostly adequate, it should be noted that the combined transfer of economic activity to domestic goods և residential real estate.
Trade data show. Exports of services decreased by 26% compared to the pre-epidemic trend, which significantly reflects the freezing of world travel.
Abrupt withdrawals in the energy sector are less common.
Both sides of the same coin are: Consumer spending on gasoline and other energy products is 11% lower than pre-epidemic trends. Business spending on facilities fell by 19%, reflecting a pullback from both the oil industry and commercial real estate investments.
Separately, the withdrawal from the state և local government, many of which have faced a funding crisis, is real. Their costs are 4.3% lower than the pre-epidemic trend. Another $ 89 billion in lost activity, though, is likely to return as federal stimulus dollars flow into their coffers and schools.
In the conditions of each decline there are shifts in the composition of economic activity. After the catastrophic event, the economy rarely looks the same as before. But the scale and speed of economic recovery is impressive for this crisis.
We do not yet know to what extent the service sector will be fully recovered when vaccinations take place or whether the cost of domestic goods will return to more normal levels when incentive inspections are spent, people redistribute their budgets on the way to travel. We do not know whether the rise in IT spending and the reversal of oil drilling are part of long-term economic change (especially given the Biden administration’s emphasis on clean energy).
Moreover, to the extent that these shifts in the composition of the economy may be semi-annual, we do not know how smoothly the economy will be regulated. Many former waiters or hoteliers can get worse at becoming construction workers or software engineers.
This is what makes the 2021 economy so promising, but also worrying. The boom is here. We just do not yet know how bumpy the journey will be, trying to return to something that seems to be in full bloom.