Household spending cooled last month, but already appears to be on the rise as consumers – armed with federal stimulus money and many of them freshly vaccinated – travel, eat out and return to shopping malls.
Consumer spending – the biggest driver of economic activity in the US – fell 1% in February, the Commerce Department said Friday. The decline was largely attributed by economists to cold weather and snowstorms that hit much of the country, closing businesses and keeping families indoors.
Household income – including Americans’ wages, investment returns, and government support – also fell 7.1%, although that drop, too, was temporary. The federal government’s distribution of checks to most households as part of a $ 900 billion coronavirus package had pushed household income up 10.1% in the past month, also contributing to the increase in spending. Income fell back to a more normal level in February.
Income and expenditure will rise in the coming weeks, setting the economy up for what economists say will be the strongest growth in years after last year’s pandemic contraction. Under the latest Covid-19 stimulus package – a $ 1.9 trillion plan signed by President Biden in March – the government has already started issuing checks to households. While unemployment remains high, the aid package also brought in $ 300 a week in improved compensation for unemployed workers. Meanwhile, millions of people receive the vaccine every day.
That combination – higher incomes and an increasing number of people protected from the worse consequences of the deadly virus – is expected to unleash a burst of economic activity in the coming weeks. Private sector data on restaurant visits, hotel bookings and air travel all show a steady increase in spending in recent weeks. In Texas, restaurant bookings soared after elected leaders lifted restrictions on businesses. Bookings there recently exceeded the 2019 level.