US stimulus fuels sharp rebound in income, spending in March

Washington (AFP) –


Americans saw a big recovery in earnings last month, boosted by a new round of government aid that quickly found its way to retailers, according to government data released on Friday.

Personal income surged 21.1 percent in March after falling seven percent in the prior month, "impacted by the continued government response to COVID-19," the Commerce Department said.

The $1.9 trillion American Rescue Plan relief measure enacted last month included $1,400 cash payments to most taxpayers while also expanding unemployment benefits and aid to businesses, as well as tax credits meant to fight poverty.

With extra cash on hand, personal consumption expenditures rose 4.2 percent or $616 billion in the month, more than recovering from the one percent drop in February, according to the report.

The data reflect the reopening economy and Americans' increased willingness to eat out and travel, aided by widespread access to vaccinations.

Two-thirds of that increase was spent on goods, led by nondurables like recreational items and hobbies, while spending at restaurants and hotels led the services increase, the report said.

Greg Daco of Oxford Economics noted that the increased income "led to an immediate spending splurge, but households were also clairvoyant, with 85 percent of the income flow being saved or used to pay off debt."

The data for March were already incorporated into the first quarter GDP report released Thursday, which showed the world's largest economy grew at a 6.4 percent annualized rate.

Disposable personal income jumped 23.6 percent in March, which helped drive a 67 percent surge in the first three months of the year -- the biggest increase ever recorded.

Meanwhile, the Federal Reserve's preferred inflation measure, the PCE price index, was up 0.5 percent in the month and 2.3 percent year-over-year, the report said.

The GDP report showed PCE grew at 3.5 percent annualized in the first quarter.