U.S. personal consumption expenditures (PCE) increased 8.2 percent in May month-on-month as states continued reopening efforts, rebounding from a record drop in the previous month, the U.S. Commerce Department reported Friday. PCE nosedived by a revised 12.6 percent in April month-on-month amid widespread shutdowns triggered by the COVID-19 outbreak, following a revised 6.6-percent drop in March. PCE, which accounts for about two thirds of the U.S. economy, had seen a moderate growth before the COVID-19 outbreak, increasing by 0.2 percent in February from the prior month.
“Before we celebrate the return of the consumer prematurely, personal consumption expenditures are still down 11.7 percent from the February peak,” Tim Quinlan and Shannon Seery, economists at Wells Fargo Securities, wrote in an analysis. They noted that nondurables are off 7.4 percent from March peak and services are down 15.7 percent from its February peak. “A full services rebound cannot happen prior to a full and safe re-opening,” the economists said. Personal income, meanwhile, dropped 4.2 percent in May, primarily reflecting a decrease in government social benefits to persons as payments made to individuals from federal economic recovery programs in response to the pandemic continued, but at a lower level than in April, the report noted.
U.S. Congress in late March passed a 2.2-trillion-dollar economic relief bill, which includes expansion of unemployment benefits, 1,000-dollar-plus direct payments for working Americans, among other things. “The expected drop in personal income was not as bad as feared, as a rise in jobless benefits, but also wages and salaries, offset the drop from stimulus payments going away,” the economists said. The personal income and spending data came one day after the Labor Department reported 1.48 million Americans filed for first-time jobless claims last week, the 12th weekly decline in a row but still a historic high. The total number of people claiming benefits in all programs for the week ending June 6 was 30.6 million, an increase of 1,294,309 from the previous week, according to the report.
Several U.S. states have recently seen an uptick in COVID-19 cases as businesses continue to resume operations across the nation, casting a shadow over the current path to reopening and raising uncertainty over the prospect of economic recovery. The southern state of Texas, one of the earliest to ease its containment measures, halted steps to reopen its economy on Thursday after a recent spike in COVID-19 cases. U.S. Federal Reserve Chairman Jerome Powell said in a virtual congressional hearing last week that significant “uncertainty” remains about the timing and strength of the recovery.
“Much of that economic uncertainty comes from uncertainty about the path of the disease and the effects of measures to contain it,” said the Fed chairman. “Until the public is confident that the disease is contained, a full recovery is unlikely.” The International Monetary Fund on Wednesday revised down its forecast for the global economy amid mounting COVID-19 fallout, and projected the U.S. economy to shrink by 8 percent this year.
