U.S. consumer spending skyrocketed in May for the biggest jump on record, but the news was offset by a drop in personal income and the threat of another wave of economic disruption as coronavirus infections surge in the Sunbelt and now in California as well.
Consumer spending jumped 8.2 percent in May, the U.S. Department of Commerce reported on Friday (June 26), representing the biggest increase since the federal government began tracking the number in 1959.
The rise in spending came as an increasing number of businesses across the country, including a growing range of retail establishments, reopened their doors in May as states began to lift coronavirus lockdown restrictions.
However, the jump in consumer spending was tempered by a 4.2 percent decline in personal income amid double-digit unemployment and as the first wave of government stimulus payments — including one-time $1,200 checks — began to wear off.
And personal income across the U.S. is expected to take an additional hit at the end of July, when an additional $600 a week in unemployment benefits, paid for by the federal government, is slated to sunset.
“The decrease in personal income in May primarily reflected a decrease in government social benefits to persons as payments made to individuals from federal economic recovery programs in response to the COVID-19 pandemic continued, but at a lower level than in April,” the report by the department’s Bureau of Economic Analysis found.
A renewed spike in coronavirus infections also offered another sobering note, with the U.S. reporting a record 40,000 new cases on Thursday, with reports of hospitals in the South and West now facing capacity issues and governors in Florida and Texas moving to halt, at least temporarily, their reopening plans.
Overall, consumers spent an additional $892.6 billion in May, with a majority of that money, $590.4 billion, going to pay for goods. The increase was led by more spending on cars and trucks and auto parts, as well as “recreational goods and vehicles,” the report noted.