U.S. consumer spending fell by a record amount in March, reflecting the seismic shock to demand from coronavirus-related lockdowns.
The Commerce Department reported Thursday that personal consumption expenditures declined by 7.5%, or $1.13 trillion, last month — the sharpest monthly drop on records that go back to 1959. The previous record was a decline of 2.1% in January 1987.
Government-issued “stay-at-home” orders “led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending,” the department noted.
The report also showed personal income fell by 2% in March, the largest decrease since 2013, as employers started to cut payrolls and reduce workers’ hours and compensation.
An inflation gauge closely followed by the Federal Reserve dropped 0.3% and was up 1.3% from a year ago, well below the Fed’s 2% target for inflation.
The lockdowns largely took effect in the second half of March. “I think this is the tip of the iceberg,” said Blerina Uruçi, a senior U.S. economist at Barclays, told The Wall Street Journal. “The worst is yet to come with the April data.”
Consumer spending is the main driver of the U.S. economy, accounting for more than two-thirds of the country’s total economic output. The sharp pullback in spending last month contributed to a 4.8% plunge in gross domestic product in the first quarter.
“The coronavirus fear, the social distancing measures, the financial volatility and plummeting confidence have taken a severe toll on consumers’ ability and willingness to spend,” Lydia Boussour, senior U.S. economist at Oxford Economics, told the Associated Press.
Grocery spending helped offset declines at restaurants last month but with many Americans stockpiling food in March, the WSJ said, it “might not provide as much of a boost in April.”
In the past six weeks, more than 30 million Americans have lost their jobs, curtailing their willingness to spend money. According to the Commerce Department, wages and salaries, the largest part of incomes, fell by 3.1% in March.
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