Headline from today's Trono Globe and Mail:
Consumers are buying goods again, but services are slow to recover
Exactly. Without reading the article (it's gated and I'm not a subscriber), I can understand the headline.
- The expected costs of using services have risen considerably under covid, including the costs and risks involve with the possibility of contracting the disease oneself.
- So instead of hiring people to do things for us, or instead of going places for entertainment, we buy stuff instead, e.g. televisions, ready-made meals, etc. We are substituting things (which fall into the broad economics category of capital) for labour.
- Yes, good economic theory often treats consumer durables as capital goods.
- That's the substitution effect.
- There's also an income effect as people who are receiving increased gubmnt assistance during covid are spending more on goods.
- And people who work from home are spending less on day care and less on commuting (including auto services) and spending more money on things to entertain the kids and themselves.
Query: what has happened to personal saving during covid?