Cooler but still well above normal this week

MPR News helps you turn down the noise and build shared understanding. Turn up your support for this public resource and keep trusted journalism accessible to all. 

Turn Up Your Support

From iPads to dresses, Americans flush with cash are stepping up their spending, helping turbo-charge the U.S. economy.

 reported Friday that personal income jumped 21.1 percent in March — the largest increase on record as the government sent out  $1,400 relief payments as part of the $1.9 trillion coronavirus rescue effort. 

Personal spending also jumped by 4.2 percent. The stimulus checks arrived at a time of rising hope as coronavirus vaccines continue to roll out. 

And spending is also increasing from wealthier Americans, even as many continued to squirrel money away towards their savings.

"There was a very quick money burning a hole in their pocket among lower-income groups. But now we're seeing higher-income groups also spending," said Jonathan Silver, CEO of Affinity Solutions, which tracks credit card spending. "People were just saying, 'Hey, we're about to go outside. We see a sort of sense of normalcy, so I need to refresh my wardrobe." 

For now, spending continues to be focused on physical objects.

That is being reflected in a recent spate of earnings. Apple reported this week revenues surged 54 percent as demand for company devices such as iPhones and iPads remained strong, while Tesla 

According to the data on Friday, spending on durable goods such as cars and furniture saw the biggest increase — up 10.2 percent. Spending on non-durable goods such as clothing and groceries jumped 6.5 percent.

By comparison, spending on services rose by a more modest 2.2 percent. But that is soon expected to change.

Throughout the pandemic, consumption has been unusually tilted towards goods — many of which can be delivered — while in-person services such as travel and entertainment have suffered. 

But forecasters expect that balance to shift in the months to come, as more people get vaccinated and feel more comfortable getting on airplanes or going to concerts or ballgames. 

 "As we pivot from our goods consumption into services, you'll also see surge pricing in everything from airfares to hotel rooms. And you may have more people eating out than you did in the past," said chief economist Diane Swonk of Grant Thornton.

Still, not everybody spent all of their additional income last month. Much of the money was socked away, with the data on Friday showing the personal savings rate nearly doubled to 27.6 percent. 

Those savings, along with other cash that Americans have stockpiled during the past year while not eating out or vacationing, could end up financing many more months of robust spending. 

 the U.S. enjoyed during the first three months of the year will continue, even in the absence of additional relief payments.   

Business and Economic News

Health

COVID-19

Scott Horsley

Author

Personal income jumped by a record 21 percent last month, largely thanks to those $1,400 relief payments. The extra cash helped fuel a jump in spending that should continue in the months to come.

Flush with cash, Americans are buying everything from iPhones To Teslas

Go Deeper.

Like this?

News you can use in your inbox