Household spending increases after cooling last month

Household spending cooled last month, but already appears to be picking up steam again as consumers – armed with federal stimulus funds and many of whom are newly vaccinated – travel, eat out and return to malls.

Consumer spending – the main driver of economic activity in the United States – fell 1% in February, the Commerce Department said on Friday. The drop was largely attributed by economists to the cold weather and snowstorms that hit much of the country, shutting down businesses and keeping families indoors.

Household income – including American wages, investment income, and government assistance – also fell 7.1%, though the drop was also temporary. The federal government’s distribution of checks to most households as part of a $ 900 billion coronavirus relief program had resulted in a 10.1% increase in household income in the previous month, which resulted in also contributed to the increase in spending. Income returned to more normal levels in February.

Income and spending are expected to increase in the coming weeks, preparing the economy for what economists predict will be the strongest growth in years after the pandemic-induced contraction last year. As part of the latest Covid-19 stimulus package – a $ 1.9 trillion plan signed by President Biden in March – the government has already started delivering checks to households. While unemployment remains high, the relief program has also provided $ 300 per week in increased pay for unemployed workers. Meanwhile, millions of people get vaccinated every day.

This combination – higher incomes and a growing number of people sheltered from the worst effects of the deadly virus – is expected to trigger an explosion of economic activity in the coming weeks. Private sector data on restaurant visits, hotel reservations and air travel all show a steady increase in spending over the past few weeks. In Texas, restaurant reservations increased rapidly after elected leaders lifted restrictions on businesses. Bookings there recently surpassed 2019 levels.