Now, President Biden is talking about 1.9 trillion stimulus. And that sounds like a lot of money. Fantastic, right? It's going to get the economy going. Except Not so fast. If we look back on what happened with the first round with the cares act, according to the Federal Reserve, only about 29% of that stimulus package actually went into spending, the rest of it went to pay down outstanding debt, such as credit cards, or any kind of outstanding mortgages, or just went straight into savings.
That means looking forward, rather than 1.9 trillion going into the economy, it's more like about 550 billion, just not a whole lot of bang for that extra debt buck.
And on top of that, the morning console, they just conducted a survey of households, looking at how they plan to use this next round. Now, more than a third of them said that they're going to add it to their savings. Now, if we look back at what they responded when they were asked the same question for the cares act, back last spring, that number was 23%. So that's even more savings plan this time around. Another 18% said that they expect to be using it to pay down credit card debt.
Everyone's really nervous about the jobs market. So right off the bat, that's about 52%, that isn't going to go into spending in the economy. Add to that about 30% really has to just go to buying food and rent that's gonna take up about another 2%.
So where's the spending gonna come from?
That's a lot of money and a lot of debt, that's not going to be going to buying another Xbox. In fact, if we look at what's been going on with real personal consumption expenditures, and that's just a fancy way of saying what people are spending that's really been rolling over in recent months. And in fact, spending on goods overall slowed last quarter, that's the fourth quarter of 2020. That's giving us a sign that the consumer is really getting maxed out and furniture, which had been doing great, you know, we're all sitting at homes and I got to get rid of that couch. Well, that's been rolling over as well as appliance sales, and even audio and video equipment.
So, when we look at this stimulus and what you're looking at how to take advantage of it, assuming that that's going to go into a big uptick in retail sales probably isn't your best bet.