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Economy in Brief

U.S. Personal Savings Hits Record Level as Spending Is Curtailed and Income Surges
by Tom Moeller  May 29, 2020

• Spending cutbacks are extensive due to coronavirus.

• Personal income jumps with government support.

• Price declines are widespread.

Personal consumption expenditures declined a record 13.6% (-16.9% y/y) during April prompted by business closures and government stay-at-home guidelines. The decline followed a 6.9% drop in March, revised from -7.5%. A 12.0% decline had been expected in the Action Economics Forecast Survey. In constant dollars, total spending fell 13.2% (-17.3% y/y). Real durable goods spending declined 16.7% (-23.8% y/y) during April after a March decline of 11.8%. Spending on motor vehicles fell by 15.3% (-31.8% y/y), the fifth consecutive monthly decline. Home furniture & appliance buying weakened 17.8% (-21.1% y/y) and recreational goods & vehicles outlays fell 12.0% (-7.5% y/y). Real nondurable goods buying fell 15.5% (-10.0% y/y) after surging a record 5.0% last month. The decline reflected a 17.2% drop (+1.6% y/y) in food & beverage sales after they jumped 21.9% in March with the stay-at-home requirement. Apparel spending dropped 28.9% (-49.0% y/y) and is down by roughly one-half in the last two months. Real gasoline outlays weakened 25.3% (-34.7% y/y) as individuals stayed at home. Real spending on services plunged a record 12.0% (-18.5% y/y) after falling 9.3% in March. The decline was led by a 42.9% reduction (-59.2% y/y) in sales of recreation services. Spending at restaurants & hotels fell 34.4% (-51.4% y/y) which came after a 27.0% March retrenchment. Transportation services outlays fell roughly one-third (-47.5% y/y) and outlays on health care dropped 28.8% (-39.1% y/y). These declines were tempered by a 0.8% rise in outlays on housing & utilities (1.9% y/y).

Personal income increased 10.5% (11.7% y/y) in April after falling 2.2% in March. A 5.8% decline had been expected. The increase reflected an 91.1% surge (103.6% y/y) in government transfer payments. Wages & salaries fell 8.0% (-8.5% y/y) due to the record cut in employment with the outbreak of the coronavirus. Proprietors income plunged 12.2% both m/m and y/y, down significantly for a second straight month. Rental incomes held steady (3.6% y/y) while receipts on assets eased 1.5% (-1.4% y/y), due to a 0.4% decline (0.0% y/y) in both personal interest & dividend income.

Disposable personal increased 12.9% (14.4% y/y) last month. Adjusted for price inflation, take-home pay increased 13.4% (13.8% y/y) after falling 1.8% in March.

Last month's strength in income relative to spending caused the personal savings rate to surge to a record 33.0%. The level of personal saving rose by 371.5% y/y.

The PCE chain price index decreased 0.5% in April (+0.5% y/y). The price index excluding food & energy fell 0.4% (+1.0% y/y). Motor vehicle prices edged 0.4% lower (-1.4% y/y) and home furnishings & appliance prices eased 0.2% and were unchanged y/y. Apparel costs dropped 4.7% (-5.4% y/y). Gasoline & oil prices fell 19.4% (-31.4% y/y). Services costs eased 0.3% (+1.7% y/y). Housing & utilities prices rose 0.2% (2.7% y/y) and health care prices also rose 0.2% (2.1% y/y). Energy prices were off 9.2% (-17.6% y/y), the fourth straight monthly decline. Food prices rose 2.4% (3.9% y/y), the strongest increase since February 1974.

The personal income and consumption figures are available in Haver's USECON database with detail in the USNA database. The Action Economics figures are in the AS1REP NA database

Personal Income & Outlays (%) Apr Mar Feb Apr Y/Y 2019 2018 2017
Personal Income 10.5 -2.2 0.5 11.7 4.4 5.6 4.7
  Wages & Salaries -8.0 -3.5 0.5 -8.5 4.6 5.0 4.7
Disposable Personal Income 12.9 -2.1 0.5 14.4 4.3 6.1 4.7
Personal Consumption Expenditures -13.6 -6.9 0.2 -16.9 4.0 5.2 4.4
Personal Saving Rate 33.0 12.7 8.2 8.0 (Apr. '19) 7.9 7.7 7.0
PCE Chain Price Index -0.5 -0.2 0.1 0.5 1.4 2.1 1.8
  Less Food & Energy -0.4 -0.0 0.1 1.0 1.6 2.0 1.6
Real Disposable Income 13.4 -1.8 0.4 13.8 2.9 4.0 2.9
Real Personal Consumption Expenditures -13.2 -6.7 0.1 -17.3 2.6 3.0 2.6
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