Household spending cooled last month but already appears to be accelerating again as consumers—armed with federal stimulus money and many of them newly vaccinated—travel, dine out and return to shopping centers.
Consumer spending—the biggest driver of economic activity in the U.S.—fell 1% in February, the Commerce Department said Friday. The drop was largely attributed by economists to cold weather and snowstorms that struck much of the country, shutting businesses and keeping families indoors.
Household income—including Americans’ wages, investment earnings and government aid—also fell, by 7.1%, though that drop, too, was temporary. The federal government’s distribution of checks to most households as part of a $900 billion coronavirus-relief package had caused household income to rise by 10.1% the prior month, which also contributed to the jump in spending. Income reverted to more normal levels in February.
Income and spending are set to rise in coming weeks, setting up the economy for what economists forecast will be the strongest growth in years after last year’s pandemic-induced contraction. Under the latest Covid-19 stimulus package—a $1.9 trillion plan signed by President Biden in March—the government has already started delivering checks to households. While unemployment remains elevated, the relief package also provided $300 a week in enhanced compensation for jobless workers. Meanwhile, millions of people are getting the vaccine every day.
That combination—higher incomes and a rising number of people shielded from the worse effects of the deadly virus—is expected to unleash a burst of economic activity in coming weeks. Private-sector data on restaurant visits, hotel bookings and airline travel all show a steady pickup in spending in recent weeks. In Texas, restaurant bookings rose briskly after elected leaders lifted restrictions on businesses. Bookings there recently exceeded 2019 levels.
Read More News: Household Spending Picks Up After Cooling Last Month