Consumers weary, set to start spending
After a devastating year, consumers are eager to get back to concerts, family vacations and happy hours that don’t involve Zoom or their couch.
When Josh Noparstak and his wife bought $200 tickets to see a Fall Out Boy, Weezer and Green Day concert at Wrigley Field in August, for once he was happy to shell out for Ticketmaster’s fees.
Noparstak, 30, a financial planner who lives in River North, usually sees about a dozen concerts a year. He tried a couple of virtual performances since the coronavirus pandemic began but said it wasn’t the same.
“It’s the atmosphere,” he said. “I miss going to shows.”
After a devastating year, consumers are eager to get back to concerts, family vacations and happy hours that don’t involve Zoom or their couch. Between rising vaccination rates, easing COVID-19 restrictions and a new round of stimulus payments landing in bank accounts, economists say people who have the means to do so are poised to splurge — as long as they continue seeing signs of recovery.
While Gov. J.B. Pritzker recently introduced a “bridge” phase to bring the state into its final reopening phase, a recent spike in COVID-19 hospitalizations and positivity rates has health officials warning the state could be on the brink of another surge.
Still, with any Illinoisan over 16 expected to be eligible for the vaccine on April 12, some are starting to feel optimistic.
Jeffrey LaMorte Salon & Day Spa, with three Chicago-area locations, recently booked services for a handful of weddings in the coming months, something that hasn’t happened in a long time, said owner Jeffrey LaMorte.
“People we haven’t seen are coming back, and others are coming more frequently … People are recognizing we’re opening up again,” he said.
While some families struggled or relied on stimulus payments and enhanced unemployment benefits to make up for lost income during the past year, others socked away cash they might otherwise have spent on meals out and exotic vacations — roughly $2 trillion in extra savings, said Jim Glassman, head economist for commercial banking at JPMorgan Chase.
The personal saving rate, or the share of disposable income consumers saved, has been above 12% since last March and hit 20.5% in January, up from 7.6% in January 2020, according to the U.S. Bureau of Economic Analysis.
“There is such a reservoir of money available to be spent,” Glassman said. “I’ve never seen anything like It.”
Retail sales surged 7.6% between December and January. Sales slowed in February but were still above levels in February 2020, according to the U.S. Census Bureau.
At Destination XL Group, shoppers recently started buying more than the basics — underwear, activewear and work from home apparel — for the first time in a long time, especially older, more affluent customers, CEO Harvey Kanter said during an earnings call last month.
Between easing restrictions, stimulus checks and fact that many consumers have been saving, “the roaring 20s and celebratory times ahead may be very real,” he said.
Other retailers have expressed worries that spending would shift to experiences. Big Lots benefited from earlier stimulus packages but during a recent earnings call, CEO Bruce Thom predicted the latest round of checks would have a smaller impact on sales because “those customers have more options to spend that money on.”
Consumers are still primarily making essential purchases, but they will likely prioritize experiences that offer a sense of community as they grow more comfortable going out and restrictions lift, said Diana Smith, associate director for the U.S. retail and apparel industries at market research firm Mintel.
But while restless consumers are tired of dealing with the pandemic and “yearning for some sense of normalcy,” many are still worried about exposure to the virus that causes COVID-19 or facing financial hardship, Smith said.
“We’re seeing signs of optimism … but things aren’t going to jump back overnight,” Smith said.
Francesca Musumeci, 31, a hair stylist in Wicker Park, recently got a pedicure and a tattoo, in both cases from people she knows are being as careful about exposure to COVID-19 as she and her husband, a nurse, have been.
Other activities on her wish list — getting a massage and facial, having dinner in a restaurant and visiting her brother-in-law in New Orleans — are on hold.
“Everything that we have been doing by being safe, it has kept both of us from getting sick, so we decided that we’re on that trajectory until we’re both vaccinated,” she said.
Businesses in some hardhit industries reported signs of optimism, even if sales are far from back to normal.
U.S. airlines are seeing 46% fewer passengers than before the pandemic, but more than a million people passed through airport security checkpoints each day since March 11 — something that hasn’t happened since early March 2020, according to the Transportation Security Administration.
Restaurants are still dealing with capacity constraints, but Near North steakhouse Steak 48 has been booking up regularly, said chief brand officer Oliver Badgio.
At party boat operator Chicago Tiki Boat, overall bookings for the season, which starts May 1, are about 40% below normal, but people are planning ahead for summer, said administrative director Delilah Rosado. All seven boats are fully booked on Memorial Day and Labor Day weekends and the company has scheduled birthday, bachelor and bachelorette parties, she said.
The Chicago Cubs, meanwhile, said more than 150,000 people signed up for the chance to purchase tickets to capacity-capped games before they went on sale to the general public. The team declined to say how many tickets sold, but individual tickets to five of the first six games are sold out, according to the team’s website.
Freddy Fagenholz, general manager of Murphy’s Rooftop, which overlooks the stadium, said it had started to feel like “there’s a light at the end of the tunnel,” even though groups have only fully bought out the rooftop for eight games.
“People are still waiting to see,” he said. “The more restrictions loosen, that’s the key.”
Fewer than half of U.S. consumers say they feel safe going to a restaurant, staying in a hotel, attending in-person events or flying, according to a Deloitte survey of 1,000 people conducted during the week that ended March 3.
Still, anxiety is falling and confidence in all those activities is growing, especially among people who have been vaccinated, said Stephen Rogers, managing director of Deloitte’s Consumer Industry Center. About 45% of people who have been vaccinated feel safe flying, compared with 35% of people who haven’t been vaccinated, he said.
The risk of COVID-19 isn’t the only hurdle holding back spending: Many consumers are still facing financial hardship. According to Mintel’s research, about 53% of Americans say they don’t have much money left by the time they take care of the basics, Smith said.
Illinois’ seasonally adjusted unemployment rate in February was 7.4%, up from 3.6% the same month the year before, according to the Illinois Department of Employment Security.
And while 89% of Illinois households with mortgages and 74% of those paying rent say they are caught up on payments, about 29% of renters had no or slight confidence they would be able to make the next month’s payment, according to a U.S. Census Bureau survey conducted during the first half of March.
In the same survey, 30.6% of Illinoisans said it had been somewhat or very difficult to pay for household expenses over the past week, while about 38.7% had no difficulty.
The latest round of stimulus payments should help struggling households, though it’s less clear how much will turn into spending. As of Thursday, more than 130 million payments worth approximately $335 billion have been sent to taxpayers, the Treasury Department said.
In a survey of people who received the first $1,200 stimulus last year, only about 15% of people said they spent most or all of the check, said Michael Weber, assistant professor of finance at the University of Chicago’s Booth School of Business. People spent, on average, about 40% of the cash, splitting the rest between savings and paying down debt.
Some may have chosen to save due to uncertainty about the course of the pandemic, Weber said. Others might just have been unable to spend it the way they wanted to.
“With improvements in vaccination rates, we could imagine a larger amount might be spent in the coming weeks and months,” Weber said. “Things are opening up, and people seem more comfortable.”
Another remaining question mark for the Chicago area is not only when local restrictions ease, but when tourists and business travelers, who also bring dollars to the city, will return, said PNC Financial Services Group senior economist Bill Adams.