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Changes in discretionary spending during the pandemic

Data from the Visa spending momentum index

FRED recently added new data for the Visa Spending Momentum Index (SMI), which can offer new insights into US consumer spending behavior during the COVID-19 pandemic.

The FRED graph above shows two SMI data series* available between January 2014 and May 2024:

    • The red bars represent changes in the momentum of non-discretionary spending categories. Those include medical/health, food, and utilities—among several others.
    • The blue bars represent changes in the momentum of discretionary spending, which is everything else (except for spending on restaurants and gas).

The position of the bars indicates the direction of change in spending momentum: Bars above the zero line signal consumer spending was above trend, and bars below the zero line signal consumer spending was below trend. The length of the bars indicates how big those upswings and downswings were.

During March and April of 2020, discretionary spending markedly slowed down. It remained very close to its trend value for the next 12 months and surged above trend for almost a whole year afterward. Between March 2022 and the time of this writing, the Visa SMI has signaled either at-trend or below-trend discretionary consumer spending.

* Learn more about the units of SMI and the definitions of discretionary and non-discretionary spending. Btw, Restaurant and gas spending are included in a total (all-categories) SMI.

How this graph was created: Search FRED for and select “Visa Spending Momentum Index: Discretionary: United States.” From the “Edit Graph” panel, use the “Add Line” tab to search for and select “Visa Spending Momentum Index: Non-discretionary: United States.” Next, use the “Edit Lines” tab to customize the data by typing the formula “a-100.” Do that for both series. Last, use the “Format” tab to change the graph type to “Bar.”

Suggested by Diego Mendez-Carbajo.

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