Personal Income Rose 0.5% in March; Spending Rose 1.1%

Washington, DC, April 29, 2022-Personal income increased $107.2 billion (0.5%) in March, according to estimates released by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $89.7 billion (0.5%), and personal consumption expenditures (PCE) increased $185.0 billion (1.1%).

Real DPI decreased 0.4% in March, and Real PCE increased 0.2%; goods decreased 0.5%, and services increased 0.6%. The PCE price index increased 0.9%. Excluding food and energy, the PCE price index increased 0.3%.

U.S. household spending rose 1.1% in March, the Commerce Department said Friday, reflecting higher prices and demand for services.

According to the Wall Street Journal, “Higher spending partly reflects that strong inflation, as prices for everything from gasoline to restaurant meals have risen. Meanwhile, in recent months, Americans have increased spending on services as Covid-19 pandemic concerns about going out have faded for many.

“‘We think consumers are going to continue to rotate more toward services spending,’ said Kathy Bostjancic, chief U.S. economist at Oxford Economics. She expects the pickup in consumer spending should be sustainable, ‘but there are obviously large headwinds facing the consumer right now,’ like inflation and supply-chain disruptions as a result of lockdowns in China.

“Separate data from the Commerce Department released Thursday showed inflation-adjusted consumer spending for the first quarter as a whole rose at its fastest pace since last spring, boosted by spending on services like restaurant meals and healthcare.

“Outlays on both services and durable goods like cars picked up, even amid the brunt of the Omicron wave of Covid-19, rising inflation and supply-chain strains. 

“‘The consumer has money. They pay down credit-card debt. Confidence isn’t high, but the fact that they have money, they’re spending their money,’ JPMorgan Chase & Co. chief executive Jamie Dimon said on an earnings call earlier this month. He expected that to continue in the second and third quarters, though inflation and the war in Ukraine pose challenges to the economic outlook, he said.

“The consumer spending figures come amid mixed signals from the broader economy. The unemployment rate was a low 3.6% in March and workers’ wages grew, but U.S. gross domestic product contracted at a 1.4% annual rate in the first quarter of 2022.

“That was largely due to a widening of the trade deficit, thanks to strong consumer demand for imports, and slower inventory stocking by companies. Analysts expect the weakness to be short-lived: Economists surveyed by the Journal earlier this month expected a growth rate of 3% in the current second quarter.”