Reflecting the distribution of stimulus checks by the federal government, the Commerce Department released a report on Friday unexpectedly showing a substantial increase in U.S. personal income in the month of April.
The Commerce Department said personal income spiked by 10.5 percent in April after tumbling by a revised 2.2 percent in March.
The jump in personal income came as a surprise to economists, who had expected income to plunge by 6.5 percent compared to the 2.0 percent slump originally reported for the previous month.
Disposable personal income, or personal income less personal current taxes, also soared by 13.4 percent in April following a 1.8 percent drop in March.
Meanwhile, the report showed a steep drop in personal spending, reflecting the impact of the coronavirus-induced lockdown.
The Commerce Department said personal spending plummeted by 13.6 percent in April after a revised 6.9 percent slump in March.
Economists had expected spending to tumble by 12.6 percent compared to the 7.5 percent nosedive originally reported for the previous month.
“The 13.2% m/m plunge in real personal spending in April, which leaves consumption nearly 20% below its February level, illustrates the full extent of the hit to demand from the coronavirus lockdowns,” said Andrew Hunter, Senior U.S. Economist at Capital Economics.
He added, “But the surge in personal incomes, as the stimulus cheques came through, should help to support the recovery.”
With income spiking and spending plunging, personal saving as a percentage of disposable personal income surged up to a record high 33.0 percent in April from 12.7 percent in March.