Data suggests that most Americans used their COVID-19 stimulus payments to pay down debt or put it into savings.
The New York Federal Reserve released the data on Tuesday with results of a survey conducted among 1,300 U.S. household during the month of June. Among respondents who received an economic impact payment, 89 percent of those surveyed with a median payment of $2,400 per household, 36 percent said they put the money into savings while 35 percent said they used it to pay down debt. Another 3.2 percent said they donated the money.
Only 18 percent of respondents said they spent the money on essential goods and services, while 8 percent said they used the money on non-essential spending. Age was an important factor in how money was spent, with essential spending rising and non-essential spending declining as respondents got older.
A second survey conducted during the month of August asked respondents how they might use a second stimulus payment in the amount of $1,500. A 45 percent plurality said they would save the money, while 30.9 percent said they would use it to pay debts. Of those who said they would spend the money, 13.7 percent said it would be used for essentials and 6.8 percent on non-essentials. Respondents who said they would donate the money numbered 3.7 percent.
The August survey also asked how those receiving unemployment benefits in June had used their funds. Almost half, 48.4 percent, said they used it to pay down debts. Money was spent on essentials 23.9 percent of the time, while another 23 percent put it into savings. Unemployment money was used for non-essentials only 4 percent of the time, with 0.7 percent using it for donations.
Although the amount of money immediately being spent back into the economy is lower than some might have expected, the results suggest that those who received the payments may been drawing on funds that they have saved in order to continue spending over a longer period of time.
Recent data suggests that consumers continued to spend at a relatively steady pace months after stimulus payments ended, according to Yahoo Finance. Whether that continues could depend on the course of the COVID-19 pandemic.
“At least in theory, a lot of potential consumer spending sitting in personal checking accounts and smaller-than-usual credit card balances just now,” Nicholas Colas of DataTrek Research told Yahoo. “To unlock that cash, consumer confidence must improve and Americans need to feel it is safe to return to many leisure activities still hurt by pandemic concerns (travel, in person dining, etc.).”
The arrival of a second stimulus payment could also have a major impact on the economy. However, with President Donald Trump and Democrats and Republicans in Congress deadlocked in agreeing to terms and passing new legislation, it is unclear when that might happen.