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From iPads to dresses, Americans with cash are increasing their spending by helping to turbo charge the US economy.
The Commerce Department said Friday that personal incomes jumped 21.1 percent in March, the biggest record increase since the government sent $ 1,400 in relief as part of a $ 1.9 trillion rescue effort to save the coronavirus.
Personal expenses also jumped 4.2%. Stimulus checks came at a time of growing hope as coronavirus vaccines continue to spread.
And spending is rising for richer Americans, even as many continue to make money on their savings.
“There was a lot of fast money burning a hole in their pockets among lower-income groups. But now we’re also seeing higher-income groups spending,” said Jonathan Silver, CEO of Affinity Solutions, which tracks spending on credit cards. “People were just saying, ‘Hey, we’re going out.’ We see a sense of normalcy, so I need to freshen up my wardrobe. ”
For now, the costs continue to be focused on physical objects.
This is reflected in a recent revenue stream. Apple said revenue rose 54 percent this week as demand for corporate devices such as the iPhone and iPad remained strong, while Tesla reported record profits.
According to data on Friday, the cost of durable goods such as cars and furniture increased the most – by 10.2%. Expenditure on non-durable goods such as clothing and groceries jumped 6.5%.
By comparison, service costs increased by a more modest 2.2%. But that is expected to change soon.
During a pandemic, consumption is unusually prone to goods – many of which can be delivered – while personal services such as travel and entertainment suffer.
However, forecasters expect this balance to change in the coming months, as more people are vaccinated and feel more comfortable getting on planes or going to concerts or ball games.
“As we move from consuming goods to services, you’ll see leaps and bounds in everything from plane tickets to hotel rooms. And you may have more people eating out than in the past,” said Grant Thornton, chief economist Diane Swank.
Still, not everyone spent all of their extra income last month. Much of the money was lost, with data on Friday showing that the percentage of personal savings has almost doubled to 27.6%.
These savings, along with other money that Americans have stored over the past year without eating out or resting, could ultimately fund many more months of stable spending.
This suggests that the rapid economic growth that the United States enjoyed in the first three months of the year will continue, even in the absence of additional aid.