Oil and bitcoin rise, but US small business optimism slides – business live

SourceThe Guardian
SectorFinancial Markets
CountryMiddle east

The pandemic, and the waves of the restrictions that have accompanied it, have had highly selective effects. They’ve hit some areas of spending much harder than others. The decline in aggregate consumer spending would almost certainly have been more protracted and more widespread – affecting not just activities that involve infection risk but those that do not – but for the furlough schemes. These have helped shield household incomes from the big drop in national income last year. But that’s not the only thing going on. Spending on some of these “non-risky” things have actually risen faster than incomes – in some cases faster than they have for many years.

So it looks as though consumers used some of the money they would have spent on riskier activities – going to restaurants and so forth – to buy other things instead. This makes sense. A pound less spent on one thing needn’t mean a pound less in total. Indeed under some (admittedly extreme) conditions you’d expect substitution of this sort to be one-for-one. If people are entirely indifferent between different sorts of consumption – if they’re just as happy with “non-risky” as “risky” stuff – aggregate spending wouldn’t fall at all (for given ...read more...