US consumer expending up 8.2%, partly erasing record plunge

In May, American consumers have increased their spending by a record 8.2% to partly erase great plunges of previous two months.

Friday's Commerce Department report showed that the Americans have come up and they are spending in May despite a 4.2% lessen in their personal income which had increased by 10.8% the previous month.

As in April, the income had jumped due to the providing of billions of dollars of support from government in the form of unemployment aid. Government is also providing $1,200 stimulus checks.But in May those stimulus checks were no longer be counted as a income for larger people.  

Federal government is giving $600 a week to the unemployed as a additional benefits.The federal money has pumped about $20 billion a week into the economy which made many unemployed to sustain from sinking.

But Trump administration officials said that the $600 a week plan will be eliminated after the July and they further be said that the are not in any mood of extending this plan.

In testimony to Congress last week,Federal Reserve Jerome Powell said that lawmakers should think of extending of unemployed aid. And if it's is not given to the unemployed ,it might reduce the spending of money freely by consumers . He further assumed that joblessness will continue at high at the end of this year.

As in last month's increase in consumer spending, the corona virus cases also increases which may cause the closing of the the business shutdown. As if this happens the lesser people will spend money on travel, shopping or attending large events. That will make make the uprising in economy to the opposite.

Around 70% of economic activity depends on how much  Consumer spends .

Inspite of the rise in spending in May, economists have guessed that GDP is declining and will roughly reach to 30% annual rate in the April-June due to the declining at 5% rate in January-March span.

 

 This is the worst quarterly generated by U.S  since 1948.

Amid rapidly rising infections across many states, risks to the outlook are dangerously tilted to the downside.This statement was said by,q Gregory Daco, chief U.S. economist at Oxford Economics, said in a research note.

Friday's report showed that 29% increased in spending on durable goods such as autos and recreation vehicles while only 8% growth on non durable goods such as food and clothing

In the last month's 4.2% drop in incomes was the sharpest such decline since 2013. It showed that the economic stimulus checks and other emergency government benefits fallen by an annualized $1.1 trillion in May after having surged $3 trillion in April, when most of the payments were distributed.

Inflation, as calculated by a gauge tied to consumer spending, edged up a scant 0.1% in May, the report showed.

Inflation over the last year is just 0.5% which is far below the Fed's annual 2% target. 

According to the National Bureau of Economic Research, the association of economists that is the official arbiter of recessions in the United States said that in February,the economy fell into deep recession.

 

Most analysts thinks that the economy will rebound in the second half of this year and it gets to its pre-pandemic stage in the late 2021. 

 

The Trump administration is predicting a fast and robust economic rebound starting this summer.

Most of the private economists are far less optimistic.They warn that if the pandemic increases again and it forces a second round of business closures, it would make the job market and the economy to even more down. And they also said that damage could be horrible. 

The only hopeful sign for the US comes from the data compiled from the Chase Bank credit and debit cards which shows that consumers are slowly but consistently increased their spending as the government distributed the stimulus checks in mid-April.source