Individuals Save In April With Many Businesses Shutdown

Last Friday's April Personal Income and Outlays report from U.S. Bureau of Economic Analysis reported a significant month over month increase in personal income, up 12.9% and a dramatic increase in savings as a percentage of disposable income, up 33.0%. At the same time the income and outlays report showed a significant decline in personal consumption expenditures (PCE), down 13.2%.

Not surprisingly the country wide stay at home mandates and business shutdowns limit the consumer's ability to spend money; hence, the steep decline in PCE. Maybe a little more surprising is the jump in disposable income and savings. However, these two variables provide insight into the extent of the government's fiscal and monetary support targeted to the consumer.

In total, monetary and fiscal stimulus is projected to exceed $9 trillion, just over 40% of GDP. As more states relax stay at home mandates and the 36 million people that have filed for unemployment claims over the last two months begin returning to work, it is likely economic activity begins accelerating. Sure, certain industries will be slower to recover, like travel and hospitality, but others like restaurants may see more of a "V-shaped" recovery. All else being equal, relaxing government business restrictions and stay at home mandates is important to getting the economy growing again as the government's fiscal support has tried to limit the damage to the consumer.