Online shopping is using up some of the savings from staying at home to fight the pandemic.
Physical distancing basically means not doing anything outside your home other than grocery runs and exercise. No bars and restaurants, no concerts, no trips to the mall. There’s an opportunity to save a lot of money every week, but it’s slipping away in some households.
A report this week from Royal Bank of Canada shows that consumer spending was down 17 per cent from pre-crisis levels in late April, a serious decline that is worrying for the economy. But spending was down about 30 per cent in late March. Households so far unaffected by job losses appear to be ramping their spending back up again.
Here are the spending trends RBC found in late April:
- Household goods and services: Back to pre-crisis levels, driven by construction materials, appliances and furniture.
- Software: Remained strong and way ahead of pre-pandemic levels.
- Electronics and hobbies: Rose to levels above those early in the year.
- Clothing: Up slightly, but well below levels earlier this year.
- Groceries: Up almost 25 per cent from the beginning of the year and still trending higher.
- Restaurants: Spending is down 50 per cent from the start of the year, but slowly moving higher as a result of increased use of take-out.
Online shopping is appealing on a number of levels right now – you stay away from others, you can get exactly what you want without multiple trips and there’s the anticipation of having cool stuff arriving on your doorstep to brighten your day. But from a personal finance point of view, online shopping presents a couple of problems.
First, there’s online order creep. Instead of visiting one or two stores per week, you place a bunch of online orders for delivery or curbside pickup. For example, a grocery order, a Canadian Tire order, an Amazon order, a pet supply order and an order from a local store for coffee or tea. Second, it’s easy to order stuff at prices you’d balk at paying if you were able to visit different stores to get the best price. Convenience can take precedence over price when online shopping.
As noted in Pandemic Personal Finance Update #7, there could be a second wave of financial distress as a result of the pandemic. If your household finances are holding up right now, don’t waste the opportunity offered by physical distancing to build up your emergency fund.
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Rob’s personal finance reading list…
COVID-19 and your credit score
Three ways to hurt your credit score: missing payments, using credit more and seeking more credit. The credit-monitoring system is designed to pick up signs of stress like these in your finances.
COVID-19 and your credit limit
Some people are finding that the spending limit on their credit card has been lowered. It looks like banks are proactively limiting borrowing room to protect themselves from defaults as a result of the pandemic.
Do you need to start worrying about inflation?
A portfolio manager looks at the risk of inflation as a result of government spending on economic support in the pandemic. The pros and cons of various investments as an inflation hedge are discussed.
Choosing better passwords
Being a personal finance columnist means living in password hell. So many accounts, so many passwords. This suggestion about using “passphrases” instead of passwords caught my eye.
Ask Rob
Q: Who is financing the annual government deficit due to COVID-19? In other words, to whom will we owe money to, including interest?
A: The federal and provincial governments raise money for their operations by issuing bonds, which are purchased by institutional investors like pension funds and mutual funds, as well as individuals. More bonds will be issued to pay for the increased spending to fight the pandemic, but the interest rate paid by governments will be extremely low.
Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
If you’re using a budget to exert more control over your household spending, you should really try the Budget Planner offered by the federal Financial Consumer Agency of Canada. Nice tech, and you can tailor it to your personal circumstances.
In case you missed these Globe and Mail personal finance-related stories
- How the coronavirus pandemic could alter your car-buying experience
- School is almost out and students are getting help in this COVID-19 world
- Here’s why there is reason for optimism as the TSX emerges from a bear market (for Globe Unlimited subscribers)
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