Spending slowdown on services drops second-quarter GDP
When life is uncertain, we slow our spending. When we slow spending, the economy feels it.
When Tiki Tails Dog Resort opened in Cape Coral over a year ago, things were anything but “ruff” for the doggy daycare and grooming business.
“We were busier than expected, right away,” owner Brandon Perau said.
Perau says things took a turn when the coronavirus pandemic hit, and “The Happiest Place On Earth” shut off its lights.
“As soon as Disney closed, that’s when all the cancellations started coming in,” Perau said.
To stay afloat, Perau got a PPP loan, grant money and ran bare-bones specials.
“We had to work longer and harder for significantly less money,” Perau said.
And less money spent on services like grooming and daycare means our GDP takes a hit.
Thursday, the economy saw the GDP drop at an annual rate of 32.9% from April to June.
Economist Victor Claar with FGCU said it’s important to understand what the annual rate means.
“It’s important to keep in mind that the number we saw was really scary 33% drop in GDP, but that’s translated into an annual rate,” Claar explained. “So the actual decline in the second quarter of 2020 was actually 9 or 10 %.”
Claar says this recession is different. People slowed their spending on services, not things like appliances or cars.
“The good news is these numbers are already behind us,” Claar said. “The bad news is I think nobody really knows what’s going to happen in July, August and September.”
What we do know is that in June, consumer spending was up 5.6%.
As for July, Perau says they’re keeping busy, but preparing for a possible end of summer slowdown.