Consumer spending rose 4.2per cent last month, the Commerce Department said Friday, the best showing since a 6.5per cent spending increase in June. Spending had fallen 1per cent in February as frigid winter weather disrupted sales.
Incomes surged by a record-breaking 21.1per cent in March after having fallen 7per cent in February.
The big gain reflected delivery of billions of dollars in relief payments with individuals getting up to USD1,400 payments from the USD1.9 trillion support package President Joe Biden pushed through Congress last month.
The strong gains offer yet more evidence that the economy is poised for a rapid recovery following last year''s pandemic-triggered recession.
Economists are counting on strong consumer spending, which accounts for two-thirds of economic activity, to power a rebound this year with a trio of economic factors coming to a head: trillions of dollars in government support; increased mobility due to vaccinations; a surge in pent-up consumer demand.
The government reported Thursday that the overall economy, as measured by the gross domestic product,, rose at a robust annual rate of 6.4per cent in the January-March quarter.
Many analysts believe that growth in the current April-June quarter will be even stronger, perhaps topping 10per cent.
Friday''s report showed that inflation rose 2.3per cent in March compared to the same month a year ago but excluding volatile food and energy, the gain was a lower 1.8per cent.
The Fed at this week''s meeting kept its key interest rate at a record low of 0per cent to 0.25 percent and Fed Chairman Jerome Powell said the central bank will not be concerned by what it expects will be a temporary blip in inflation this spring.
Friday''s report showed that consumers saved a lot of their big surge in incomes in March, pushing the savings rate to 27.6per cent, up from an already elevated 13.9per cent in February.
Excess household saving now totals around USD2.3 trillion, a figure that has been climbing over the past year of lockdowns.
Analysts believe consumers will start spending this savings stockpile in coming months as increased vaccinations get them back into stores to shop, providing a strong boost to the overall economy this year.
“The strong consumer showing at the end of the first quarter sets the tone for a summer boom,” said Gregory Daco, chief economist at Oxford Economics. “As health conditions improve and the economy reopens, generous fiscal stimulus, rebounding employment and rising optimism will help unleash pent-up demand.”
Daco forecast that consumer spending will increase by more than 9per cent this year, the strongest performance since 1946.
Friday''s report showed that the 4.2per cent rise in spending reflected an increase of 8.1per cent in the purchase of goods and a smaller 2.2per cent rise in the purchase of services, a category which includes restaurant dining, entertainment and other activities which have suffered the most from the pandemic shutdowns.
The expectation is that spending on services will keep rising if the virus situation keeps improving.
The record 21.1per cent jump in incomes included a 1.1per cent rise in wages and salaries, reflecting strong hiring in March, and a 95.1per cent surge in the category of government receipts covering the increased payments from Biden''s USD1.9 trillion rescue package.
That package has so far delivered more than 163 million economic impact payments totaling USD384 billion with payments of up to USD1,400 per individual. (AP) IND
Disclaimer :- This story has not been edited by Outlook staff and is auto-generated from news agency feeds. Source: PTI