“You might see strong growth numbers on spending, but we’re coming out of a deep hole,” he said.
The rise in personal income shows how critical the huge stimulus package passed in March was as the pandemic devastated private-sector jobs. Without it, the economic damage would have been even worse, experts say.
“This is an unambiguous triumph of countercyclical government spending, which will save the U.S. economy a heap of trouble in the medium to long term,” said Troy Ludtka of Natixis CIB Americas, a corporate and investment banking firm. “If the private sector retrenches, government needs to pick up the slack. This is exactly what data for the month of April depicts.”
April represents the deepest point of the current economic downturn, said Michael Gapen, chief U.S. economist at Barclays. “The personal spending data was much weaker than we anticipated, and it spread across virtually all major categories,” he said.
But there were reasons for optimism in the report, namely in the income and savings data, he said.
“The potential good news is that there’s a large pool of savings that consumers can draw on to support spending as states reopen,” he said. “April should be the trough, and we expect May and June to look better, setting the economy up for a decent rebound in the second half of the year.”
In a separate report Friday, the University of Michigan reported that its gauge of consumer sentiment ticked up to 72.3 in May from 71.8 in April. The measure remains 20 points below its 12-month average.
“The fact that sentiment stabilized is encouraging,” Mr. Daco said. “But once the stimulus from the federal government fades out, we will be left with depressed incomes. This is a large amount of money for many people.”
Allie Radice is one of the unlikely savers who has benefited from federal payments but worries about how long they will last. She successfully applied for unemployment insurance after her work as a dancer as well as a server in the catering industry in Manhattan dried up in March.
Article source: https://www.nytimes.com/2020/05/29/business/economy/coronavirus-consumer-spending.html
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