BoA Data Shows US Consumer Spending Drop as Omicron Worries Loom
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As the omicron variant begins to spread across the US, it is already impacting on consumer spending plans, according to data from Bank of America.
Notably travel spending appears to be weakening, which will worry those who have been bidding up the stock prices of airlines and hotel groups.
Nevertheless, demand for pre-approved installment loans and other lines of credit remains robust as the economy continues to improve.
Jim Cramer this week told viewers of his CNBC Mad Money Show that the US economy could see a huge boom if and when the Covid pandemic recedes, akin to the Roaring Twenties economic expansion that followed the post World War 1 flu pandemic.
Spending on airline tickets drops as refunds pick up
BoA economist Anna Zhou notes that spending on airlines fell: “The weakness seems to be driven by cancellations of international trips: when we looked at the indexed levels of air ticket refunds, we found a meaningful pick up in refunds from non-U.S. carriers and little change in refunds from domestic carriers.”
Bank of America credit and debit cards spending on airlines fell back 15% on a two-year basis for the week ended 4 December. In the previous week spending on airline tickets was 13% higher.
US consumer spending: holiday sales take a hit
Consumer spending is also falling in other important sectors the BoA data shows.
Zhou commenting on the data said: “In our view, the slowdown in the 1-year and 2-year growth rates reflects a smaller incremental boost to spending from Cyber Monday than prior years given the more spread-out shopping this year. On an indexed level, the pace of holiday shopping has slipped below that of prior two years.”
Those seeking work is at its lowest levels since the 1960s, but the market for instant pay day loans is still buoyant, suggesting credit is affordable.
Omicron may not be as bad as feared – signal end in sight for pandemic?
However, data coming out of South Africa is currently suggesting that the illness resulting from infection by the omicron variant may not be severe.
But often those infected with Covid don’t tend to present were the most severe symptoms until the third or fourth week of the virus.
If the virus is following a typical evolutionary course, it should become less deadly with successive mutations and also become a more efficient transmitter – this could be what’s happening with omicron, which could signal the beginning of the end of the pandemic.
For now, consumers seem to be taking on board the media reports about its greater transmissibility and the statements of concern from public health officials.
