How will the latest political news and vaccine rollout impact holiday spending?
It was a busy news week with talk of a stimulus deal and the COVID-19 vaccine rollout. How will this affect holiday spending and the overall economy? Find out in the latest episode of the Market Pulse podcast, “Holiday Gift or Kick the Can?” I interviewed Cris DeRitis, deputy chief economist at Moody’s Analytics. This 12-minute podcast will provide you with all the insights you need on the economy, small business and consumer credit. And, you’ll still have time for those holiday preparations.
Below are some highlights from this episode.
Theresa: How do you see consumer confidence impacting spending and our financial behaviors as we move into the holiday season, as well as the first part of the year?
Cris: So, confidence is really interesting. It is ticking up overall, but if you dig a little bit deeper and you break that out by income, you see a real difference. Folks in the upper end of the income distribution, people who have been able to work remotely, those who have some wealth in the stock market or are in housing, they’re doing pretty well. Their confidence is rising. They’re certainly more optimistic.
Folks at the other end are still struggling. And they’re quite worried about the economic future here between now and when those vaccines actually arrive to the full population. So for the retail environment, I think you’re going to see those trends playing out. You’re probably still going to see lots of demand for the essentials, groceries and household goods as people are still preparing to hunker down. Some additional disposable wealth is available to folks at that upper end. So, you will see some additional retail sales, but overall certainly we should be prepared for a retail sales environment that isn’t thriving. It’s not collapsing, but we’ve still got a long way to go between here and full recovery.
Theresa: It seems like it’s a one-two punch. Not just getting the vaccine out there, but also the stimulus. What do you foresee happening as Congress meets to decide on the stimulus package. Do you think there will be a split package?
Cris: There is still a lot of uncertainty in the air in terms of what actually happens. And we’ve been going back and forth within our own economics group here, in terms of understanding what Congress will actually agree to. I think the need for additional stimulus is known. I don’t think there’s much debate in terms of having to provide some additional support until we get that vaccine really working its way through the economy.
There is a little bit of political tea leaf reading here to try to understand what will happen. My best case scenario would be some type of deal that gets us to February. So kick the can if you will, down the road until the next Congress, next administration. That to me seems like the most plausible path at this point. It would be great if we actually do agree on a more comprehensive package and remove some of that uncertainty. But, at least let’s move on and at least get folks to February.
The real problem we have here is the fiscal cliff with so much of the stimulus set to expire, right at the end of the year.
Whether that’s the extended unemployment insurance benefits, pandemic unemployment insurance, student loan forbearance was set to expire at the end of the year. That’s now been pushed to the end of January. Same with a foreclosure moratorium that’s been pushed out. So, it sounds like we are pushing things out just a month or so. And the remaining piece is really providing this additional stimulus package. It would be, again, ideal to have something comprehensive that gets stimulus checks out to folks who could really use them at this point. But political reality seems quite mixed, especially with the Georgia races in play here.
The Market Pulse podcast is published on the third Thursday of each month. Learn more about this production.