Chart of the Week – Waiting for the Opportunity to Spend

We believe spending patterns among income groups is telling a strong story for the back half of 2021.

Spending among low-income earners returned to baseline fairly quickly with help from federal stimulus programs. However, spending in the high-income group lagged, never returning to pre-pandemic levels. We believe this represents pent-up demand and is an important driver of our above-consensus 2021 GDP growth forecast of 5%. The top 20% of income earners produce roughly 40% of the spending. Assuming our lives begin to normalize through the spring, we believe built up demand will start rolling through economic statistics, providing a strong finish to the year.

Consumer Spending During the Pandemic

Source: Affinity Solutions, Strategas, Ivy Investments. Dates shown are January 13, 2020 through November 29, 2020. Data is the change in average consumer credit and debit card spending, indexed to January, 2020 and seasonally adjusted. Low income cohort represents zip codes with median household income less than $46,000 per year. High income cohort represents zip codes with median household income greater than 78,000 per year. Data for the week of November 29, 2020 was weak due to seasonal issues and subsequently reversed. This chart is being provided as a general source of information for education purposes only, and is not intended as a recommendation to purchase, sell or hold any specific security or to engage in any investment strategy.