US consumer spending decreased extremely during the coronavirus lockdown, which is a huge problem for the spending-addicted US economy.
According to a Bureau of Economic Analysis (BEA) report released Friday, data on April's personal consumption showed a 13.6% decrease in consumer spending, which is equal to $1.89 trillion.
The personal consumption expenditures (PCE) index fell by 0.5% from April's index. The index decreased by 0.4%, if we exclude food and energy since their prices can fluctuate more rapidly.
Since the BEA began tracking the data in 1959, this has been the largest month-to-month decline. In March, when the lockdown began, the BEA recorded a 6.9% drop.
In the US, about two-thirds of the economy relies on consumer spending, meaning that the results stated above aren't a good sign for the start of the quarter. The drop in spending is one of the signs of an economy in struggle, a pandemic-linked recession.
The pandemic took more than 100,000 lives and millions of people lost their jobs and businesses, while others opted to rely on government's stimulus.
The largest measure of economic performance, the gross domestic product, is expected to decrease as much as 40% on an annualized basis between April and June. However, the data won't be published until the quarter is over. Economists will have to rely on other numbers like the PCE index to draw an illustration.
Data recorded on April showed that since Americans didn't spend money, they saved more than they normally do. Personal savings as a percentage of disposable income increased to 33% in April. It was around 13% in March.
The BEA said that the drastic increase was a result of the increase in government benefits during the pandemic.
