Newly sent out stimulus checks from lawmakers may be having their desired effects: boost consumer spending — which makes up about 70% of the U.S. economy — and yank the U.S. economy out of a severe recession this summer.
“As the [first] quarter progressed, we saw a second phase related to entertaining and educating at home. Puzzles and video games took off. Parents became teachers. Adult bicycles started selling out, as parents started to join the kids. An overlapping trend then started emerging related to DIY and home-related activities. Think games, home office, exercise equipment and the like. It was also clear, a lot of people were taking a do-it-yourself approach as they bought items like bandanas and sewing machines to make masks,” explained Walmart CEO Doug McMillon on his company’s first quarter earnings call on Tuesday.
McMillon continued, “We could see customers looking to improve their indoor and outdoor living spaces. Our home categories in stores and online took off. Toward the end of the quarter, another phase emerged. Call it relief spending, as it was heavily influenced by stimulus dollars, leading to sales increases in categories such as apparel, televisions, video games, sporting goods and toys. Discretionary categories really popped towards the end of the quarter.”
Later on in the call, Walmart U.S. CEO John Furner added that same-store sales in April surged 9.5%. “We’ve had a solid start to May in the U.S. but we believe stimulus spending has been a big driver, which we don’t anticipate staying at these levels throughout the quarter.”
Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, individuals were eligible for up to $1,200 (depending on income level) or $2,400 for married couples. Children under 17 were granted $500. Those checks began hitting bank accounts in mid-April.
Comments from McMillon and Furner aren’t the lone indicators that stimulus checks are being spent (the goal), rather than saved for a rainy day.
Total card spending (using Bank of America cards) ran at a pace of down 10% year-over-year for the five-day period ending May 7, notes Bank of America U.S. economist Michelle Meyer. That’s improved from a 36% run-rate decline for the last five days of March. Meyer adds that excluding autos, card spending gained 1% from May 3-7.
Meyer attributes the improvement to stimulus checks and parts of the U.S. economy reopening.
Home Depot appears to also be benefiting from stimulus check spending.
“During the last three weeks of April and continuing into the first two weeks of the second quarter we have seen a significant acceleration to double-digit comp sales growth, with strong performance across most of the store, as customers turn to repairs and home improvement projects as a result of ongoing measures to promote social distancing practices in our stores,” CFO Richard McPhail told analysts on an earnings call Tuesday.