American spending collapsed by a record 13.6% in April

More than 40 million people have filed first-time jobless claims since the coronavirus pandemic forced the US economy to shut down in March.

Posted: May 29, 2020 9:13 AM
Updated: May 29, 2020 12:15 PM


American consumer spending ground to a halt during the coronavirus lockdown, and that is a massive problem for the spending-addicted US economy.

April's personal consumption data showed a 13.6% drop in consumer spending, according to a Bureau of Economic Analysis report released Friday. That's equal to $1.89 trillion, and drags spending down to a level not seen since September 2014.

It was the largest month-to-month decline since the BEA began tracking the data in 1959, and worse than economists had expected. It followed a similarly steep, revised 6.9% drop in March when the lockdown began. Spending has nosedived nearly 20% since February, before the lockdown to stop the spread of Covid-19 began.

About two-thirds of America's economy runs on consumer spending, so this is yet another sign of an economy in a dire, pandemic-linked recession. Economic data could improve as states begin to reopen, but much uncertainty remains about the shape and pace of any recovery.

Saving over spending

While consumer spending plummeted, incomes and savings rates soared last month.

The government's economic relief stimulus bill, which includes expanded unemployment benefits and one-off payments to many Americans, has put more cash in people's wallets. Without the stimulus measures, incomes would have likely fallen, said TD Bank senior economist Sri Thanabalasingam.

Personal incomes jumped by 10.5%, after declining by 2.2% in March. For many, the expanded benefits are helping pay for necessities and bills, rather than fuel other purchases.

Meanwhile savings as a percentage of disposable income soared to 33% in April, up from some 13% in March.

Now that parts of the country are reopening, politicians and economists hope many employees can return to work, businesses will reopen and consumers will begin spending again. The next few months will show whether the math is as easy as that.

Economists predict it will take consumers some time to resume their normal spending habits, including discretionary expenses on items like movie tickets or restaurant meals. Given that millions of Americans have lost their jobs due to the pandemic, uncertainty on that point remains high.

The country went into lockdown in the second half of March to limit the spread of coronavirus. Businesses shut down and laid off millions of workers. As of last week, one in four American workers has filed for first-time unemployment benefits over the past ten weeks.

Experts are wondering whether the government will need to deploy more stimulus to get people spending again.

Consumer sentiment is stuck at an eight-year low and hardly improved between April and May, the University of Michigan's consumer sentiment survey showed on Friday.

'Adding to consumers' concerns about a significant expected drop in income growth, year-ahead inflation expectations rose sharply, putting extra pressure on consumers' abilities to maintain their living standards,' said Richard Curtin, chief economist of the Surveys of Consumers.

Economic pain but no inflation

America's gross domestic product, the broadest measure of economic performance, is expected to drop as much as 40% on an annualized basis between April and June, the first quarter that felt the full effects of the pandemic. That would be the worst quarter on record.

The Federal Reserve Bank of Atlanta's GDPNow model predicts a 51.2% annualized drop in the current quarter after factoring in Friday's economic data, worse than previously expected.

First quarter GDP growth was revised down to a 5% drop on Thursday.

Data for the second quarter won't be released until several weeks after the period ends. Until then, economists have to fall back on other numbers, like the personal consumption expenditure, to paint a picture.

The PCE index is the Federal Reserve's preferred measure of inflation, because it is a broader price measure than the consumer price inflation index. The PCE index fell 0.5% from March. Excluding food and energy, for which prices can change more rapidly, the index slipped 0.4%.

Friday's numbers should be reassuring to economists worried that the trillions of dollars in monetary and fiscal stimulus will lead to a spike in inflation. So far at least, it hasn't.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 515504

Reported Deaths: 10296
CountyCasesDeaths
Harrison34999558
DeSoto33360432
Hinds32743643
Jackson24906392
Rankin22565405
Lee16455245
Madison14954283
Jones14158248
Forrest13834260
Lauderdale12311323
Lowndes11357193
Lamar10693140
Pearl River9748244
Lafayette8868143
Hancock7849132
Washington7559169
Oktibbeha7229138
Monroe7068179
Pontotoc7033110
Warren6885178
Panola6791135
Neshoba6744210
Marshall6707142
Bolivar6468151
Union643598
Pike5942157
Alcorn5921107
Lincoln5540136
George510680
Prentiss508285
Tippah495683
Itawamba4884107
Scott478999
Tate4777117
Adams4776125
Leflore4749144
Copiah458195
Yazoo458092
Simpson4566117
Wayne443472
Covington434895
Sunflower4319106
Marion4295112
Coahoma4244110
Leake414191
Newton396182
Tishomingo386894
Grenada3789109
Stone366166
Jasper341266
Attala340490
Chickasaw318367
Winston318392
Clay312978
Clarke301695
Calhoun286850
Holmes272889
Smith270552
Yalobusha244947
Tallahatchie232353
Greene225149
Walthall222166
Lawrence220242
Perry214556
Amite210357
Webster206548
Noxubee188843
Montgomery182157
Carroll175441
Jefferson Davis174343
Tunica163539
Benton153139
Kemper145441
Choctaw137027
Claiborne134839
Humphreys132239
Franklin126530
Quitman107828
Wilkinson106139
Jefferson97134
Sharkey65321
Issaquena1957
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Alabama Coronavirus Cases

Cases: 847659

Reported Deaths: 16172
CountyCasesDeaths
Jefferson1163752005
Mobile743371381
Madison53434738
Shelby38413371
Baldwin38171589
Tuscaloosa36131643
Montgomery34571782
Lee25664264
Calhoun22622519
Morgan22527408
Etowah20059520
Marshall18821318
Houston17769426
St. Clair16946359
Limestone16192220
Cullman16140305
Elmore15948295
Lauderdale15055307
Talladega14244302
DeKalb13061271
Walker12138380
Blount10765193
Autauga10545157
Jackson10204195
Coffee9435192
Colbert9363210
Dale9038192
Tallapoosa7283202
Russell710165
Chilton7078170
Covington6967197
Escambia6962144
Franklin6364108
Chambers5795142
Marion5435130
Dallas5302210
Pike5128109
Clarke485686
Lawrence4845130
Winston4785110
Geneva4650136
Bibb435495
Barbour370180
Butler3444101
Marengo342793
Monroe338366
Randolph337767
Pickens334790
Fayette331485
Henry321066
Cherokee319964
Hale318889
Crenshaw261678
Washington256852
Cleburne255460
Lamar253555
Clay252069
Macon245767
Conecuh193562
Coosa185847
Wilcox178338
Lowndes178268
Bullock152745
Perry141840
Sumter139741
Greene130345
Choctaw94328
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