US personal spending plunges to record 13.6%

US personal consumption expenditures (PCE) plunged to a record 13.6 per cent in April month-on-month amid widespread shutdowns triggered by the COVID-19 pandemic, the Commerce Department reported.

The plunge, following a revised 6.9 per cent drop in March, has been the sharpest drop in government records since six decades ago, Xinhua news agency quoted a the report released by the Department’s Bureau of Economic Analysis as saying on Friday.

Personal income surged 10.5 per cent in the month, primarily reflecting a sharp rise in “government social benefits” to persons as payments were made to individuals from federal economic recovery programs in response to the COVID-19 pandemic, the Bureau said.

PCE, which accounts for about two thirds of the US economy, had seen a moderate growth before the COVID-19 outbreak.

PCE increased by 0.2 per cent in February from the prior month.

The new data came a day after the Commerce Department revised down GDP in the first quarter to a 5.0 per cent annualized contraction in a second estimate, 0.2 percentage point lower than the advance estimate in April.

“This report, however, is only a taste of what to expect in Q2 (the second quarter), when we forecast GDP to nosedive at an annualized rate of 25 per cent,” Jay H. Bryson, acting chief economist at Wells Fargo Securities, wrote in an analysis.

Bryson also noted that weak US production and personal consumption weighed on corporate profitability in the first quarter, but as with GDP, the second quarter will be “much worse” for corporate profits.

Currently, the US has 1,745,930 confirmed cases and 102,808 deaths, both tallies account for the highest in the world.