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The spring spending binge is here: Morning Brief

Myles Udland
·Anchor
·3 min read
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This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Wednesday, March 24, 2021

Stimulus is starting to feed through to the economy in a big way

Spring is here, stimulus checks have been sent out the door, and consumers are starting to ramp up their spending.

Just as we expected they would.

Data from JP Morgan and UBS published over the last few days reveal the impact economic re-openings and the disbursal of a third stimulus check to most Americans is having on consumer habits. And the early returns are robust.

The most pointed chart comes from JP Morgan's U.S. economics team, which reveals the dual impacts of additional stimulus and also the lapping of last year's collapse in spending as the pandemic got underway.

Stimulus, economic re-openings, and lapping last year's collapse in spending is going to make data like JP Morgan's credit card tracker explode higher in the months ahead. (Source: JP Morgan)
Stimulus, economic re-openings, and lapping last year's collapse in spending is going to make data like JP Morgan's credit card tracker explode higher in the months ahead. (Source: JP Morgan)

And while the massive spike in this data is obviously flattered by last year's collapse, data from Bank of America we flagged back in January showed the second round of stimulus checks fed into spending much quicker than those sent out in the spring of 2020. It follows, then, that a third round of checks would also quickly feed through to consumer spending.

Couple this with warmer weather, looser restrictions, and vaccinations averaging more than 2 million per day and it appears a spring boom is upon us.

But it's not only stimulus that is helping boost spending.

Keith Parker and the equity strategy team at UBS recently polled consumers and found those making more than $80,000 — some of whom were ineligible for the latest $1,400 checks — plan to increase their spending by the most as the economy re-opens.

"The survey results support our view that higher income households are key to driving the recovery in consumption, as their spending was consistently ~10% below pre-COVID levels," UBS writes. "Those earning over $80k annually expect to increase their spending by over 8%, compared to a 3.4% increase for those earning less than $30k and a 5.2% jump for middle income."

UBS finds that the highest earners — who have pared back their spending most during the pandemic — are likely to drive consumption growth as the economy normalizes in the coming months. (Source: UBS)
UBS finds that the highest earners — who have pared back their spending most during the pandemic — are likely to drive consumption growth as the economy normalizes in the coming months. (Source: UBS)

Similar to the dynamics we flagged with seniors ramping up air travel spending as vaccines rolled out to that population, we can see that consumer spending plans are being augmented but not determined by stimulus rolling out broadly.

This confluence of factors — stimulus, pent-up demand, and lapping weak comps — will create a few months of unprecedented and surprising economic data. But adjusting for these distortions doesn't change the core story that this is an economy ready to boom into the summer.

By Myles Udland, reporter and anchor for Yahoo Finance Live. Follow him at @MylesUdland

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