U.S. household income escalated 21.1 percent in March, fueled in part by federal relief funds, vaccinations, and the easing of restrictions from the COVID-19 pandemic, The Wall Street Journal reported Friday (April 30). The boost in income was the largest monthly increase since 1959.
Spending also increased 4.2 percent, the biggest month-over-month boost since the summer of 2020, Commerce Department reported Friday, per the WSJ. The personal saving rate also went up 27.6 percent in March from 13.9 percent the previous month.
“If we have Covid-19 cases under control, that would ideally make way for us to reopen the services sector of the economy,” Pooja Sriram, U.S. economist at Barclays, told the news outlet. “That, in fact, is a crucial aspect of ensuring that this recovery continues.”
Economists have said that even after the effects of the stimulus checks diminish, economic recovery should continue as more of the population gets vaccinated and the world continues reopening and rolling back restrictions.
The $1,400 stimulus checks for individuals included as part of the $1.9 trillion March fiscal relief package had a bigger effect on spending than the other rounds of pandemic funds, according to data-analytics company Earnest Research, per WSJ.
Spending increased 29 percent among those who received a check in mid-March compared with the same period in 2019, according to Earnest data. The first round boosted spending 23 percent and the second stimulus checks bumped spending up 22 percent.
Zach Amsel, data analytics director at Earnest, told the news outlet that bigger checks mean bigger spending, which in this case also coincided with the rollback of some pandemic-related restrictions.
Spending grew twice as fast in Pennsylvania, Texas and Florida compared with California and New York, Earnest data indicated, which aligns with the states that reopened the quickest.
“Local economies matter,” Amsel told The Wall Street Journal. “If in Texas and Florida, restrictions were never as strict as New York and California, you saw that play out since April of last year.”
The Bureau of Labor Statistics on Thursday (April 29) reported that U.S. gross domestic product (GDP) in the first quarter of 2021 grew 6.4 percent, the biggest increase for any first quarter since 1984. The biggest bump was in durable goods spending, which was led by motor vehicles and parts.
With January stimulus checks in the rearview mirror, consumer spending and household income fell in February. Household income dropped 7.1 percent and consumer spending declined 1 percent, along with an 8 percent drop in disposable personal income and a 1 percent decrease in personal consumption expenditures.