|Income, spending, savings, and inflation all rose sharply in March, almost entirely because of the latest round of government stimulus checks, the Bureau of Economic Analysis (BEA) reported Friday. The track of all these important data points follow the government stimulus payments this year. There were payments in January, when the data spiked, no payments in February when they fell, and bigger payments in March when all surged more than in January.
Income rose an all-time record 21% in March. It had fallen 7% in February. In January it grew more than 10%. Income is now 27% higher than it was pre-pandemic. Astounding.
Spending rose over 4% after falling 1% in February and rising 3.4% in January.
Consumers couldn’t spend all the money they received from the government in March. The personal savings rate was almost 28%. It was 14% in February and 20% in January. In total, Americans saved $503 billion in March alone. Since March 2020 they’ve saved almost $3.7 trillion, which is $2.3 trillion over what they normally would’ve saved.
Inflation also picked up in March, rising 0.5% for the month and 3.5% for the year. However, the year data is skewed by the low level from last year when we were in lockdown. We’ll get a better sense of inflation in May and June when the year-ago data normalizes some.
Looking ahead: All these data points have been on a rollercoaster because of government stimulus. Now that those payments are likely at an end with the end of the pandemic in sight, these data points should smooth out. The strength of the economy means they should continue to grow, but at more modest rates.
Spending may buck that trend a bit. The huge accumulation of savings means there should be plenty of fuel to stoke spending in the coming months, especially on services that consumers have been prevented from spending on the last year.
—Curtis Dubay, Senior Economist, U.S. Chamber of Commerce