US consumer spending took a record nosedive last month as Americans hoarded cash during the coronavirus pandemic, new data show.
Personal consumption spending tumbled 13.6 percent in April, marking the largest drop since the feds started tracking the figure in 1959, the US Department of Commerce said Friday.
The US savings rate, however, soared to record heights as Americans hoarded more money than ever before.
The personal savings rate reached a record 33 percent in April, up from just 12.7 percent in March, the U.S. Bureau of Economic Analysis said Friday. The rate, which tracks how much people save as a percentage of their disposable income, is the highest since the department started tracking savings in the 1960s and nearly double the previous record of about 17 percent, set in 1975.
While economists have long urged Americans to save more, it’s coming at a price as reduced spending threatens to crater the economy.
Last month’s 13.6 percent drop in spending comes as retailers have been forced to close across the country, whether they want to or not. As The Post has been reporting, retailers large and small have been attempting to open their doors through appointments in states like New York only to get shut down again.
The plunge beat economists expectations for a 12.6 percent drop and outpaced March’s 6.9 percent decrease — the previous record.
Spending decreased despite a record 10.5 percent jump in personal income, which the feds primarily attributed to expanded government benefits. Those included $1,200 checks distributed to taxpayers under the $2.2 trillion CARES Act and a $600-a-week boost to unemployment benefits.
“If the CARES Act spending was supposed to be cushioning the blow to the economy it didn’t show up because April was a complete disaster which will be recorded as the worst month for the American economy in history,” said Chris Rupkey, chief financial economist at MUFG Union Bank.
Another reason for the spending drop may be rising joblessness. Lockdowns aimed at curbing the coronavirus have spurred job losses on a scale not seen since the Great Depression. The US economy shed more than 20 million jobs in April as many businesses were forced to close and lay off workers, driving the unemployment rate to a record 14.7 percent.
Consumer spending — which makes up more than two thirds of the nation’s economic activity — may recover as states ease lockdown measures and businesses reopen. But millions of Americans remain out of work and it’s unclear how quickly those jobs will return.
With Post wires