US personal consumption crashes in April, savings rocket
By Alexander Bueso
Date: Friday 29 May 2020
(Sharecast News) - Personal incomes in the US shot higher last month as government transfers to contain the fallout from the pandemic kicked-in.
According to Department of Commerce, personal income growth in April jumped at a 10.5% pace month-on-month, dwarfing consensus estimates for a drop of 5.0%.
Ian Shepherdson at Pantheon Macroeconomics attributed the bulk of that, or roughly $2.6trn, to the US federal government's Coronavirus Aid Relief and Economic Security Act, with anther $400bn the result of increased unemployment benefits.
Personal consumption expenditures on the other hand fell by a larger than expected 13.2% (consensus: -8.5%).
Combined, the personal savings rate soared to 33.0%.
"This is the basis for believing that spending will rebound strongly as lockdowns are eased, but it will also make it easier for Republicans in the Senate to keep pushing back on the idea of further stimulus, for a while at least," Shepherdson added in regards to the savings rate.
Inflation pressures slid alongside, with the year-on-year rate change in the PCE price deflator falling from 1.3% in March to 0.5% (consensus: 0.4%), while at the core level it retreated from 1.7% to 1.0% (consensus: 1.1%).
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