March 2020 Data: Personal Income and Spending Drops

By at 30 April, 2020, 11:24 am

by Raymond J. Keating-

The U.S. Bureau of Economic Analysis reported on April 30 that personal income, disposable income (personal income less personal current taxes) and personal consumption expenditures (PCE) suffered big declines in March.

For example, personal income dropped by 2 percent in March versus February, as did disposable income. Meanwhile, personal consumption expenditures tumbled by a breathtaking 7.5 percent. That was, by far, the biggest monthly drop in this dataset going back to 1959 (the next sharpest decline was 2.1 percent in January 1987.)

In real (inflation-adjusted) terms, disposable income fell by 1.7 percent and personal consumption expenditures 7.3 percent, with the PCE price index actually declining by 0.3 percent.

When looking at the personal income report each month, the most important measure arguably is real per capital disposable income, as this tells us the income that individuals have available for consuming, saving and investing, after adjusting for population and inflation. Real per capita disposable income in March dropped by 1.8 percent. That was the largest monthly decline since the big tax increase at the start of 2013.

Source: Federal Reserve Bank of St. Louis, FRED

In fact, the March 2020 decline in real per capita disposable income ranks as the ninth largest decline in a dataset, again, going back to 1959.

In addition to the GDP and initial unemployment gains data out this week, these personal income and consumption numbers provide powerful and sobering information about how costly this pandemic is in economic terms, and how much work lies ahead to restore the U.S. economy.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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