You might think that during a pandemic, spending on health care would go up.
You’d be wrong. Estimates released by the Commerce Department on Wednesday show that consumers’ spending on health care plunged at an 18% annual rate in the first quarter of the year, as many hospitals and clinics canceled almost all noncritical procedures to clear the way for coronavirus patients.
Many health-care practices urged patients to stay away from their offices to avoid close contact and to help them free up vital medical supplies for COVID-19 care.
There’s even evidence that even desperately sick people avoided the doctor and the hospital, perhaps out of fear that they would contact COVID-19.
As a result, spending on health care by consumers declined at an estimated annual rate of $110 billion in the first quarter of the year, knocking 2.3 percentage points off gross domestic product. That accounted for almost half of the 4.8% decline in quarterly GDP.
The drop in health-care spending was signaled by the March payrolls report, which showed that employment in health-care industries dropped by 42,000, compared with average monthly gains of about 24,000. Dentists’ offices laid off 17,000 workers in March while doctors’ offices cut 12,000 jobs and home health-care services lost 6,000 jobs.
Most of the foregone spending on health care is gone for good, although there will be pent-up demand for elective procedures and for treatments such as vaccinations and teeth cleanings once people get the all-clear signal to visit the office again.
In total, consumer spending fell at an annual rate of $261 billion in the quarter, knocking 5.3 percentage points off GDP.
Almost all sectors of the consumer economy were affected by the required and voluntary closings of businesses in March. Most sectors fell, with the exception of purchases of food to eat at home and spending on housing and utilities. The declines will likely be much more intense in the second quarter, which runs from April 1 to June 30.
Here are the sectors of consumer spending that were affected most by the coronavirus and lockdowns.
|Change in spending (annualized)||Percentage contribution to GDP|
|Health care||-$110 billion||-2.3 percentage points|
|Restaurants, bars, hotels||-$75 billion||-1.6 percentage points|
|Motor vehicle purchases||-$53 billion||-1 percentage point|
|Recreation, arts services||-$47 billion||-1 percentage point|
|Clothing, shoes purchases||-$44 billion||-0.8 percentage point|
|Transportation services||-$37 billion||-0.7 percentage point|
|Groceries||+$57 billion||+1.1 percentage points|