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U.S. household incomes rose last month in the maximum amount recorded, driven by a fiscal stimulus that also drove a sharp rise in spending, laying the groundwork for strong economic growth in the second quarter.
Personal income rose 21.1% in March from the previous month, the Commerce Department said Friday, a record data dating back to 1946. The figure represented a strong investment with respect to the 7% decline in February and exceeded economists ’expectations by a 20.3 percent increase.
The increase in revenue was accompanied by a rise in spending, as consumption rose 4.2% last month, the largest increase since June. There was also an increase in the savings rate to 27.6%, from the previous 13.9%.
“This puts consumption (and probably GDP) on track for double-digit growth in the second quarter,” said Aneta Markowska, chief economist at Jefferies. “While stimulus payments have fallen far behind, the savings rate jumped to 27.6% in March, which will continue to support spending in the coming months.”
WE gross domestic product it advanced 6.4% annually during the first quarter, according to data released on Thursday, driven by a 10.7% increase in personal consumption spending and, most importantly, spending on goods.
Americans have been able to loosen their portfolio chains thanks in part to two stimulus packages: a $ 900 billion deal approved in December and another $ 1.9 billion package enacted last month.
Rapid deployment of Covid-19 vaccines and fewer restrictions on commercial activity and travel, as coronavirus hospitalizations decrease, have further boosted spending.
“The strong consumer that appears at the end of the first quarter sets the tone for a summer boom,” said Gregory Daco, an economist at Oxford Economics, who predicted real consumption growth of more than 9% this year, the highest yield strong since 1946.
“Household income is, annually, $ 5 million higher than before the success of the pandemic,” said James Knightley, ING economist. “A staggering figure that helps explain why the U.S. economy has behaved so well relative to Europe.”
Friday’s report also showed that the personal consumer spending price index rose 2.3% year-on-year in March. The so-called basic PCE index, the Federal Reserve’s preferred inflation indicator, rose 1.8% over the same period.
The Fed has noted that it is in no hurry to develop its ultra-accommodative monetary policy, even as some investors and economists have been concerned about a more sustained acceleration in inflation.
The central bank has said so before expect inflation be transient and highlight the so-called base effects, which reflect that prices fell this time last year as the coronavirus pandemic intensified.
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