Household income dropped 7.1 percent and consumer spending declined 1 percent in February as winter weather gripped most of the nation and January’s stimulus boost subsided, the U.S. Bureau of Economic Analysis (BEA) reported on Friday (March 26).
Disposable personal income (DPI) dropped 8 percent and personal consumption expenditures (PCE) declined 1 percent in a month that was wedged between January and March stimulus payments. Consumer spending makes up two-thirds of the economy.
Inflation-adjusted personal spending decreased 1.2 percent in February after January’s 3 percent jump a month earlier. Goods outlays fell 3.3 percent, while spending on services declined 0.1 percent. Spending also dropped for food services. The personal saving rate fell to 13.6 percent from an eight-month high of 19.8 percent in January, according to the report.
Spending and income are expected to rebound in the coming months as more people become vaccinated and the latest round of stimulus money is fully distributed. The $1.9 trillion COVID-19 relief package will give most individuals, even children, $1,400 each. Many people have already received the money.
“When they’re let out of the house, there is some pent-up demand, and they’re going to go out into the restaurants” as well as travel and shop, Lindsey Piegza, chief economist at Stifel Nicolaus & Co, told The Wall Street Journal. Piegza is anticipating 6 percent growth for the first quarter of this year.
A report from the National Retail Federation (NRF) is forecasting a record-breaking Easter spending surge, with people expected to spend an average of $179.70 — the most ever. The NRF report indicated that 79 percent of Americans celebrate Easter, spending $21.6 billion collectively. People are planning to spend about $31.06 on gifts, $52.50 on food and $25.22 on candy, per the report.