Virus depresses U.S. consumer spending

WASHINGTON — U.S. consumer spending suffered another month of record decline in April as the COVID-19 pandemic undercut demand, buttressing expectations that the economy could contract in the second quarter at its steepest pace since the Great Depression.

The Commerce Department said on Friday consumer spending, which accounts for more than two-thirds of U.S. economic activity, plunged 13.6 per cent last month. That was the biggest drop since the government started tracking the series in 1959, and eclipsed the previous all-time decrease of 6.9% in March.

Economists polled by Reuters had forecast consumer spending would plummet 12.6% in April. Spending last month was depressed by a drop in outlays on healthcare as dental offices closed and hospitals postponed elective surgeries and non-emergency visits to focus on patients suffering from COVID-19, the respiratory illness caused by the novel coronavirus.

There were also decreases in spending at restaurants, which have shifted to delivery and pick-up service only, and hotels and motels. Spending on food and beverages fell in April.

The report added to dismal data on the labor market, manufacturing and the housing market in underscoring the horrific impact of the coronavirus crisis on the economy, with analysts warning it could take years for activity to fully recover from the devastating blow.

The economy contracted at a five per cent annualized rate last quarter, the deepest pace of decline in gross domestic product since the fourth quarter of 2008. Consumer spending tumbled at a 6.8 per cent rate, the sharpest drop since the second quarter of 1980.