Featured Image

How Much Is Consumer Spending Still Being Impacted By COVID-19?


By Sara B. Potter, CFA  |  February 8, 2021

During the second quarter of 2020, macroeconomic activity and consumer spending declined dramatically due to the impact of government policies implemented to reduce the spread of COVID-19. Globally, the widely accepted method for mitigating the spread of the virus was to limit human movement and interactions. Strict lockdowns aimed at limiting the spread of this new and deadly virus kept consumers at home and many businesses closed their physical operations. In general retail establishments selling groceries were deemed essential and remained open, and many consumers switched to online delivery services for fresh food as well as pantry staples. But stores selling discretionary items such as clothing saw their business dry up; in the U.S. that led to an acceleration of the decline of brick-and-mortar retail. In addition, many businesses providing consumer services were forced to close. Due to the near-total shutdown of economic activity, second-quarter GDP in the U.S. decreased by 31.4% (% change vs. prior period annualized), while revenues for companies in the Consumer Discretionary sector in the S&P 1500 fell by 15.3% year-over-year.

However, since the end of the second quarter, many of the policies that constricted economic activity to reduce the spread of the virus have been loosened or eased to varying degrees across the globe and across the U.S. As a result, there has been a resurgence in economic activity in recent months. For example, the just-released fourth-quarter U.S. GDP figures show that real GDP grew by 4.0% (seasonally adjusted annual rate) in the last quarter of 2020 compared to the prior quarter.

The consumer impact is key because personal consumption makes up approximately two-thirds of U.S. GDP. Thus, has there been a change in consumer spending patterns over the past few months due to the easing of restrictions for COVID-19? Or have consumers mainly continued and accelerated their prior spending patterns due to trends caused by COVID-19? How much is consumer spending still being impacted by COVID-19?

To answer this question, FactSet looked at three data sets to gain more insight into U.S. consumer spending: Retail Sales, Personal Consumption Expenditures, and S&P 1500 Consumer Discretionary sector revenue growth.

U.S. Retail Sales

The U.S. Census Bureau’s retail sales data clearly reflect that by the end of 2020, consumers had continued their prior spending patterns despite the impact of the pandemic. Looking at the fourth quarter, which includes the full holiday season as well as the autumn surge in coronavirus cases nationwide, it is clear which industries were hard hit and which ones prospered over the last 12 months. Compared to the fourth quarter of 2019, restaurants, gas stations, apparel, and electronics and appliance stores all saw steep double-digit declines. On the other hand, retailers selling entertainment goods and construction materials fared well, as did nonstore (largely online) retailers; all saw strong double-digit growth.

Retail Sales Fourth Quarter Year-Over-Year Growth by Category (%y/y, seasonally adjusted)


4Q 2020 (%y/y))

Total Retail & Food Services


Food Service & Drinking Places


Gasoline Stations


Clothing & Clothing Accessory Stores


Electronics & Appliance Stores


General Merchandise Stores


Miscellaneous Stores


Furniture & Home Furnishings Stores


Health & Personal Care Stores


Motor Vehicle & Parts Dealers


Food & Beverage Stores


Sporting Goods, Hobby, Book & Music Stores


Building Materials, Garden Equip., Supply Stores


Nonstore Retailers


Source: U.S. Census Bureau Monthly Retail Trade report

The data lines up with the narratives of the pandemic. Consumers have foregone eating out at restaurants in favor of eating at home. Recreational activities have moved from external venues to in-home entertainment. Homeowners stuck at home are taking on long-neglected improvement projects and investing in home offices and gyms. In a work-at-home world, commuters are not driving as much and only need to “dress” for work from the waist up, if at all. Ordering everything from yoga pants to bread flour is all done online. “Self-care” is the new indulgence.

Interestingly, overall retail sales returned to their long-term trend levels by the end of the year. Even though spending was severely curtailed in the early months of the pandemic, there was a surge in the late spring and summer due to pent-up demand. In fact, despite consecutive month-over-month declines in the fourth quarter, total retail sales excluding food services were up 6.3% in December compared to December 2019.

US Retail Sales Trend

Personal Consumption Expenditures

While the Census Bureau’s retail sales data gives us a clear picture of spending on goods and at food and drinking establishments, it doesn’t cover consumer spending on many of the services that were heavily impacted by the pandemic. Fourth-quarter personal consumption expenditures were down 1.4% compared to a year ago according to data from the U.S. Bureau of Economic Analysis; however, there was a wide disparity between spending on goods vs. services. While consumption expenditures on goods were up 6.5% in the fourth quarter compared to the same quarter of 2019, services consumption was down by 5.0%.

The only two major subcategories of services that grew in the fourth quarter on a year-over-year basis were Housing & Utilities (+3.5%) and Financial Services & Insurance (+1.5%). The biggest decliners were Recreation Services (-31.3%), Transportation Services (-26.5%), and Food Services & Accommodations (-19.4%). While these three subcategories are the smallest groupings within the services component, their substantial drops were enough to drag down the overall category. The steep drop in Recreation Services is key to the narrative around the decline in consumer demand for services, as this category covers everything from amusement parks to spectator sports to casino gambling.

S&P 1500 Consumer Discretionary Revenues

Similar to what we saw with overall retail sales, companies in the Consumer Discretionary sector in the S&P 1500 are reporting year-over-year revenue growth of 5.6% for the fourth quarter.

Looking one level deeper at the industry group level, the Retailing industry group is reporting the largest (year-over-year) revenue growth of the four industry groups in the sector at 12.9%. On the other hand, the Consumer Services industry group is reporting the largest (year-over-year) revenue decline at -32.9%. These top and bottom performers mirror what we saw in the personal consumption expenditures data: consumers are spending more on goods (Retailing) while their consumption of services (Consumer Services) has fallen sharply.

S&P 1500 Q4 Consumer Discretionary Industry Group Revenue Growth (%y/y)

Industry Group

4Q 2020 (%y/y)



Automobiles & Components


Consumer Durables & Apparel


Consumer Services


Source: FactSet

Going deeper into the Retailing revenue growth numbers at the sub-industry level, seven of the ten retail sub-industries are reporting revenue growth, led by the Internet & Direct Marketing Retail, Home Improvement Retail, and General Merchandise Stores sub-industries. These top performers are similar to the top performers in the U.S. retail sales numbers. Companies classified as Nonstore retailers in the retail sales data likely overlap with companies in the Internet & Direct Marketing Retail sub-industry in the Retailing industry group as the top performers. Companies classified as Building Materials, Garden Equip., and Supply Stores in the retail sales data likely overlap with companies in the Home Improvement Retail sub-industry in the Retailing industry group as the second-best performers.

Again, all these top performers are beneficiaries of some of the trends caused by or accelerated by the pandemic. As previously noted, many consumers are having more goods delivered directly to their homes or doing curbside pickup due to the pandemic, which helps explain the high sales growth for the Internet & Direct Marketing Retail (30%) and General Merchandise Stores (15%) sub-industries. Due to spending more time at home because of the pandemic, many consumers are opting to do more home improvements and repairs, which helps explain the high sales growth for the Home Improvement Retail (18%) sub-industry.

S&P 1500 Q4 Consumer Discretionary Retailing Sub-Industry Revenue Growth (%y/y)


4Q 2020 (%y/y)

Internet & Direct Marketing Retail


Home Improvement Retail


General Merchandise Stores


Computer & Electronics Retail


Homefurnishing Retail


Automotive Retail


Specialty Stores




Apparel Retail


Department Stores


Source: FactSet

Within the Retailing industry group in the S&P 1500, there are not only sharp differences in performance by sub-industry, but also by market capitalization. Retailers in the S&P 500 are reporting (year-over-year) revenue growth of 18.1%, while retailers in the S&P 600 are reporting a (year-over-year revenue decline of 5.4%. Thus, it appears consumers are spending more at larger retailers than smaller ones. This could be due to a number of factors including government policies that have allowed many of these larger stores to stay open throughout the pandemic, more digital or online capabilities at the larger stores, and more resources at the larger stores to meet the safety protocols required by COVID-19.

S&P 1500 Q4 Consumer Discretionary Retailing Industry Group Revenue Growth (%y/y)


4Q 2020 (%y/y)

S&P 500


S&P 400


S&P 600


Source: FactSet


Based on fourth-quarter data for U.S. retail sales, U.S. personal consumption expenditures, and S&P 1500 Consumer Discretionary sector revenue growth, it appears consumers have continued and accelerated their prior spending patterns due to trends caused by COVID-19. Although restrictions have been easing, consumers are still spending more on goods and less on services. They are also continuing to buy goods (mainly from large retailers) related to more time spent at home due to the pandemic. At this point, there may not be a significant change in spending patterns until vaccinations for the virus are widespread.

John Butters also contributed to this article.

Download the latest Earnings Insight

Sara Potter, CFA

Senior Marketing Content Specialist and Economic Contributor

Ms. Sara Potter is a Senior Content Specialist and Economic Contributor at FactSet. In this role, she develops a wide range of marketing content, as well as curates and contributes to the FactSet Insight blog, providing commentary on a wide range of economic and market topics. Since joining FactSet in 1999, she has led application and content development teams, focusing on the development of products to facilitate the analysis of global markets at a macro level. Prior, she held research economist positions at Toyota and Standard & Poor’s/DRI (now IHS Markit). She earned an M.A. in International Economics and Finance from Brandeis University and a B.A. in Math/Economics and French from Dartmouth College. She is a CFA charterholder.


The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.