Consumers showcaution in recovery

Unknownimpact of virus prompted people to cut back on spending.

The U.S. economy’s NEWYORK— economic enginemay be running out of fuel.

Consumer spending accounts for about 70% of the U.S. gross domestic product, making it the single most important factor in recovering from one of the worst recessions on record. Spending plunged an unprecedented 12.9% inApril, as stores and restaurants across the country closedandconsumers sheltered at home.

Thegovernment’s$2.2trillionaid package, including $1,200 direct payments to households and an additional $600 in weekly jobless benefits, spurred the start of a spending reboundinMay. But as autumn approached with no sign of anendtothe pandemicandfurther aid tied up in Congress, consumers appeared tobe retreating.

Economists are concerned that consumers will fall back and hunker down once again without any additionalmoneyfromthegovernment. The last round of direct aid and extra unemployment funds helped many people continue to pay the rent and buy essentials. The payments also helped many whodidn’tneedthempumpmore moneyintotheeconomy, boosting businesses from home improvement to auto parts retailers.

WhilemanyonWallStreetexpect somekindofaidpackageafterCongress reconvenes thismonth, the size and breadth could spell the difference between a slow and steady climb or a stalled recovery.

The initial shock from the virus-induced shutdowns and job losses sapped consumer confidence in April, according to the Consumer Confidence Index, which is maintained by the business groupTheConferenceBoard. The unknown extent and impact of the virus prompted people to cut back onmuch of their discretionary spending and refocus on essentials as they hunkered down at home.

Buta surgeofconfidencein June gave economists hope that consumers were starting to feel better about spending. Those hopes were temperedwhen confidence fizzled again in August.

Meanwhile the spending boosts seen in May and June raised similar hopes for a sharp recovery. But a leveling out in July signaled that the road to recovery might more difficult than anticipated, especially without more government aid. And without a vaccine to alleviate the virus’ threat, the shaky recovery could go into reverse.

Part of that shaky recovery can be seen in the sustained job losses. Overall, 27 million Americans are receiving unemployment aid, and the unemployment rate of 10.2% exceeds the highest rate during the 2008-2009 Great Recession.