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Updated on Monday, June 8, 2020
Normally, household budgets don’t change drastically from year to year. The costs of some items may increase while others may drop, and usually the quantities purchased change slowly. Needless to say, these are not ordinary times.
Amid the COVID-19 pandemic, spending in some categories, like dining out and new appliances, have fallen by 50% or more. Meanwhile, spending on groceries is significantly increasing as supermarket shelves are cleared of everyday items.
These sharp changes in consumer spending patterns won’t be captured by the traditional governmental data sources for a number of months, though. The most recent official data from the Bureau of Economic Analysis (BEA) reported a decline in overall spending of 13.6% in April 2020. However, that only shows total spending in general categories. More comprehensive data on household spending, collected by the Bureau of Labor Statistics (BLS), takes more than a year to assemble even in an ordinary economic environment.
To measure how typical households are likely spending during the COVID-19 pandemic, MagnifyMoney mapped changes to household budgets, as measured by the Consumer Expenditure Survey. We found that typical household budgets will shrink by 17%, compared to spending prior to the pandemic.
- During the pandemic, typical household spending in 2020 is set to fall from $5,203 each month to $4,305 — a 17% decline. This estimate is based on after-tax spending, but still includes spending on Social Security and insurance.
- This finding closely tracks the 13.6% decrease in overall personal consumption in April 2020, the first month after the COVID-19 pandemic was declared, according to the Bureau of Economic Analysis.
- Households will likely find the biggest savings in defrayed transportation costs, followed by housing-related costs and the cost of going out to eat. We estimate the average amount spent per household on transportation — gasoline, new vehicle purchases, commuter rail and airfare that’s not being purchased — will fall by $198 a month for the average household. Housing-related costs will fall by $184 monthly, while the amount spent on going out to eat will fall by $139 a month, on average.
- Some household costs, like groceries, will significantly increase, as more groceries are consumed. We estimate that households will spend 13% more on groceries than usual, as consumers substitute the food they ate away from home for grocery and pantry items.
How households are spending during the coronavirus pandemic
Before: $710 per Month
Now: $598 per Month
We’ll all still be eating of course, but the sources of those calories will change as families shift from eating out to in-home meals. We estimate, based on retail sales data, that the average monthly amount spent on food eaten away from home will fall by $162, while the amount of money spent on food eaten at home will increase by $50. Taken in total, that means the average family food bill will fall by $112, or 15.8%.
Restaurants across the country are either closing outright or transitioning to a delivery or takeout-only model for the foreseeable future. Even fast food and quick service restaurants, which have the advantage of curb-side shopping already built in via the drive-thru model, are reporting a 50% decline in sales in March. And many independent restaurants, if they haven’t already closed, are finding that restaurant delivery isn’t sustainable, as sales don’t come close to replacing pre-pandemic levels. Then there are all the office meals that are no longer being consumed in the cafeteria or at a desk — those are usually in-home meals now, too.
Meanwhile, grocers and warehouse markets are reporting record same-store sales increases as consumers stock up on virtually everything in anticipation of spending a number of weeks in isolation. Thankfully, there’s only so much toilet paper one household can buy, and in early April, big box retailers were already reporting that sales traffic was beginning to fall, which suggests that while families may still buy more food than usual to replace restaurant spending, the long shopping cart lines and empty shelves may be less common as the year continues.
Before: $1,709 per month
Now: $1,525 per month
As one may suspect, housing is the largest component of the American household budget. As measured by the BLS before the pandemic, the typical household devotes about 30% of its spending to housing, in the form of rent and mortgage payments, utilities costs and other housing-adjacent spending like property taxes and kitchen appliances.
Most of this spending won’t immediately change. Despite the quilt of mortgage and rent deferment remedies provided by various creditors and governments, for most, the monthly rent or mortgage payment will continue to be the most heavily weighted item in the consumer basket. The monthly cost will also remain the same, absent a household moving or changing the term of their mortgage or lease.
Some costs may increase. For instance, increased electric use from being home nearly all of the day, instead of only part of it, will increase the typical utility bill for those working from home.
Other types of household spending will likely decrease though. Durable goods spending — the new refrigerators and televisions of the American household — has fallen by 66% in comparison to April 2019 sales, according to the Advance Monthly Retail Sales survey. In addition, what the BLS terms “other lodging” will obviously fall as vacations are postponed — and those are considered housing costs, according to BLS methodology.
Although new dishwashers and hotel stays aren’t the bulk of housing spending, overall we estimate these changes will pull down overall housing costs by about 11%.
Before: $868 per month
Now: $670 per month
Transportation costs are the most difficult consumer spending category to estimate, as types of commuting and associated costs vary widely among households, even those with similar incomes. Costs will decline, but percentages will vary widely depending on the mode of transportation used. Some of these spending changes will impact nearly all households, but few households will see savings in all categories. Based on our estimates and the weighting used in the Consumer Expenditure Survey, the typical household may see transportation spending decline from $868 per month to $670 per month — a 23% decline.
Monthly transportation expense changes will depend on whether monthly household transportation costs persist through the economic shutdown (like car payments) or are no longer a factor (such as mass transit costs). Car payments, whether or not the vehicle is being used, will ultimately still need to be made, even if the lender agrees to defer payments (the average monthly car payment is nearly $500, according to recent LendingTree data). Plus, car-related expenses like registration and maintenance will also continue to be due.
But other transportation costs will decline. Fewer new cars will be purchased in the upcoming months, meaning fewer multicar families than before the crisis. Another major cost that’s being slashed is gasoline: Typically, the average monthly cost of gasoline is nearly $200, according to the Consumer Expenditure Survey. in April 2020 Driving decreased by 40% from 2019, according to Energy Information Administration data. And despite gasoline prices falling below $2 per gallon in most states, homebound consumers won’t repeatedly fill up their tanks — savings will result from simply using less gasoline. Meanwhile, those who no longer travel to work by mass transit may see their costs drop to zero, and many Americans won’t be traveling by air in the next few months.
Before: $155 per Month
Now: $17 per month
Setting jokes aside about sales of tops increasing and pants decreasing (because you don’t need pants for Zoom meetings, duh), clothing and apparel sales will decline significantly. This will partly be because of less demand, but also due to most in-store retailers and boutiques temporarily shuttering to help curb the spread of coronavirus.
If an 89% percent cut in clothing spending appears outlandish, consider the recent data from industry analyst Coresight Research, which estimates more than 60,000 retail stores temporarily closed in the weeks after the pandemic was officially declared in March. Most stores — according to Coresight, about 75% — are considered “discretionary retail,” a definition that encompasses clothing and apparel stores. So for many clothing retailers, their in-store revenue has effectively fallen to zero for the time being.
Clothing retailers are unlikely to be able to make up all the revenue with online sales either. Even before the pandemic, online retail of big department stores like Macy’s and Kohl’s represented only about a quarter of their total revenue. So while perhaps some of their mail order volume may modestly increase, it’s unlikely to even come close to replacing in-person spending.
Before: $265 per month
Now: $168 per month
Board game and jigsaw puzzle sales may be having a moment, but that bump in sales is unlikely to approach the $11 billion annual spending at the box office that Americans used to do each year. While ballparks and movies remain closed, spending, for now, falls to zero, and admissions are about a third of all entertainment spending. While those who already have online subscriptions to streaming service may continue to pay for them, new stay-at-home households aren’t necessarily going to splash out for a new subscription given the precarious economy. Other types of spending considered entertainment by the BLS, such as spending on music, hobbies and toys, may remain constant for households with a steady income.
Notably, this is the category in which pet spending is accounted for. The average household spends about $60 per month on pets, according to the BLS, and that will likely remain constant throughout the pandemic.
Finally, although some may categorize vacation spending as entertainment, that’s not how it appears to the BLS, which distributes vacation spending on things like airfare and hotels among transportation and housing categories.
Before: $421 per month
Now: $380 per month
While one may expect health care spending to soar during a health crisis, costs will remain similar — at least in the short term. There has been some additional spending noted for medical supplies, but the bulk of household medical spending is for health insurance.
That said, tens of millions of workers became immediately sidelined as businesses closed amid the pandemic. While some employers kept furloughed workers on health care plans, many did not, and naturally the expenses for these households will change dramatically. Additionally, some experts are reporting that health care premiums may increase by as much as 40% or more in 2021, as insurers pass on the costs of the pandemic to the insured. So while health care costs are roughly the same in the short-term, that will likely be short lived.
Before: $1,076 per month
Now: $946 per month
Finally, there are other types of household spending that you probably don’t notice, such as the portion of your paycheck that is set aside for Social Security, newspaper subscriptions, charitable contributions and personal care services like haircuts. Some of these costs may experience a change if, for example, certain economic proposals like a payroll tax holiday come to pass. In addition, if household incomes fall sharply due to reduced employment, then payments into Social Security will also decline.
In May 2020, using data from the Bureau of Labor Statistics’ Consumer Expenditure Survey, MagnifyMoney estimated how much the typical American household budget might change as a result of the COVID-19 pandemic. Estimates are based on recent observable declines in most retail sales data from the Census Bureau, and for non-retail expenditures, industry unit and revenue data.
These estimates are based on household averages, which vary widely. In general, the typical household, as measured in this survey, has two to three household members and between one and two workers and owns two vehicles. Single-person and large households, among other types, will naturally have different spending profiles.