US consumer spending plummeted last month when Americans accumulated cash during the coronavirus pandemic, new data shows.
Personal consumption spending fell 13.6 percent in April, marking the biggest drop since the feds began tracking the figure in 1959, the United States Department of Commerce said on Friday.
However, the U.S. savings rate rocketed to record levels as Americans racked up more money than ever.
The personal savings rate hit a record 33 percent in April, up from just 12.7 percent in March, the US Office of Economic Analysis said Friday. USA The rate, which tracks how much people save as a percentage of their disposable income, is the highest since the department began tracking savings in the 1960s and nearly doubles the previous record of about 17 percent, set in 1975. .
While economists have long urged Americans to save more, it comes at a price, as reduced spending threatens to hurt the economy.
The 13.6 percent drop in spending last month comes when retailers have been forced to close across the country, whether they want to or not. As The Post has been reporting, retailers large and small have been trying to open their doors through dating in states like New York only to close again.
The drop exceeded economists’ expectations of a 12.6 percent drop and exceeded March’s 6.9 percent decline, the previous record.
Spending declined despite a record 10.5 percent jump in personal income, which the feds attributed primarily to expanded government benefits. Those include checks for $ 1,200 distributed to taxpayers under the $ 2.2 trillion CARES Act and a $ 600 per week increase to unemployment benefits.
“If CARES spending was supposed to cushion the blow to the economy, it didn’t show up because April was a complete disaster that will register as the worst month for the US economy in history,” said Chris Rupkey, chief financial economist at MUFG Union Bank.
Another reason for falling spending may be rising unemployment. Blockades aimed at curbing the coronavirus have spurred job loss on a scale not seen since the Great Depression. The U.S. economy cut more than 20 million jobs in April, as many companies were forced to close and fire workers, driving the unemployment rate to a record 14.7 percent.
Consumer spending, which accounts for more than two-thirds of the nation’s economic activity, may pick up as states ease closure measures and businesses reopen. But millions of Americans are still out of work, and it’s unclear how quickly those jobs will return.