By Syndication Washington Post, Bloomberg · Reade Pickert · BUSINESS
Household outlays fell 13.6% from the prior month, the sharpest drop in Commerce Department records back to 1959, data showed Friday. The median estimate in a Bloomberg survey of economists called for a 12.8% decline.
Incomes posted a record 10.5% increase, contrasting with estimates for a 5.9% decline, as federal economic-recovery payments were distributed under the CARES Act, the report said. It showed an annualized $3 trillion of government social benefits were provided in April, up from $70.2 billion the prior month.
With the drop in spending, the personal savings rate jumped to a record 33% from 12.7%.
The Federal Reserve's preferred gauge of consumer prices rose 0.5% from a year earlier, the slowest pace since 1961 and far below the central bank's 2% target. The core price index, which excludes more-volatile food and energy costs, advanced 1%, the least since 2011.
While the income replacement is helping consumers and Americans are slowly returning to traveling and eating out, economists expect it will take at least a year before spending recovers to pre-virus levels -- especially with no vaccine or significant treatment yet in sight for a disease that's killed more than 100,000 Americans, the highest official toll in the world.
In a contrast with the headline income number, wages and salaries fell 8% from the prior month amid widespread job losses, reductions in hours and pay cuts. The income category of personal current transfer receipts surged 89.6%.
A separate report Friday showed U.S. merchandise trade in April slumped to the lowest level in a decade as the pandemic curtailed demand and disrupted supply lines.
After adjusting for inflation, spending fell by an annualized $1.66 trillion, or 13.2% in April, also the most ever, supporting forecasts for gross domestic product to shrink by a record in the April-June period. The main drivers of the monthly decline were spending on food and beverages, restaurants, hotels and health care.