The numbers: After a stimulus-fueled binge, Americans pruned their spending in April and kept a sizable amount of savings on hand to carry them through the end of the pandemic.
Consumer spending rose 0.5% last month, the government said Friday. And incomes sank 13.1% in the absence of any further federal support.
The slowdown in spending was widely expected. Economists polled by Dow Jones and the Wall Street Journal has forecast a mild 0.6% increase.
Spending had skyrocketed 4.7% in March — the third biggest increase on record — after the government sent $1,400 checks to most individuals. That spawn a onetime 21% spike in personal income.
Big picture: Don’t sweat the big dropoff in spending in April. It’s happened each month after three doses of federal stimulus for American families.
The more critical number is much Americans have saved. The U.S. savings rate fell to 14.9% in April from 27.7%, but it’s still twice as high as it was before the pandemic.
Consumers are sure to put those savings to work over the summer, especially with the coronavirus rapidly on the wane. Americans are eager to fly, go on a vacation, attend a ballgame and do many things they couldn’t do during the crisis.
Economists estimate consumers hold $2 trillion in excess savings — money that would not have saved had the pandemic never happened.
The extra spending should also spur demand for lots of new workers at hotels, resorts, casinos, airports, theaters and the like, economists predict, and help nourish a U.S. recovery at least through the end of the year.
The one potential thorn: Surging inflation. Prices are rising for most goods and services and people are taking notice.
Key details: Americans increased spending in April on hotels, restaurants and recreation and new cars and trucks. They cut back on almost everything else.
A key measure of inflation known as the PCE, meanwhile, increased at a 0.6% rate in April.
That pushed the yearly average up to 3.6% from 2.4% — the highest level in 13 years.