Trendspotting: Winners and Losers in the 2021 Economy

NewsWire: 5/13/21

• As the economy begins emerging from the pandemic, we’re seeing new winners and losers. Americans’ spending on recreational goods is up +26% compared to the pre-pandemic economy, but spending on recreational services is down -31%. (The New York Times)
• NH: Last quarter, US GDP grew by an annualized rate of 6.4%. And the value of US domestic goods and services came in at $19.1T. That is just under the pre-pandemic high of $19.3T and points to a recovering economy. 
• But has the very nature of the US economy changed since March 2020? To answer this question, the NYT computed an “alternate scenario” where each sector grew by a 2% annual rate from Q4 of 2019. They then compared those numbers to the actual Q1 2021 output. The results? 
• The winners were largely physical commodities. Recreational goods had the largest increase (+26%). This sector includes everything from cars to books to musical instruments. Furnishings and durable household equipment increased by +16%. And information processing equipment rose +23%. This sector mostly includes computer software.
• The losers were largely service-based sectors. Recreational services were down -31%. This includes movie theaters, gyms, and concerts. Transportation services were down -19%. Food and accommodations were down another -18%. And gasoline was down -11.2%.

• None of these findings are surprising. Spending on service-based sectors tanked at the pandemic's start. And these sectors haven't fully recovered because Covid-19 is still a threat. Morning Consult conducts a weekly poll on Americans' attitudes towards reopening. The results from the first week in May show that 41% of adults are still uncomfortable dining out at a restaurant. Furthermore, 59% still feel uncomfortable going to the movies. Remember, only a third of the US population is fully vaccinated. 
• But since people aren’t spending on services, they have more money to spend on physical goods they can enjoy alone. We have written about the rise in solitary outdoor activities during the pandemic. This has translated into consumers buying fishing poles and golf clubs. And as a result, most recreational goods are skyrocketing. (See "America Goes Fishing" and "Golf Climbs in Popularity.")