Americans continue to venture back out into public to buy services they went without for more than a year—a shift that is adding fuel to the economic recovery and stirring higher inflation. Consumer spending, the biggest source of economic demand in the U.S., rose 0.5% last month after surging in March, the Commerce Department said Friday.
The report offered mostly positive signs about the direction of the economy’s path out of the pandemic-induced downturn. After months of buying goods from the safety of their homes, Americans are increasingly comfortable enough to go out in public and buy things in person, a shift that economists say is crucial to getting the economy running at full speed again. Spending on services, which account for the bulk of all consumer purchases, rose 1.1% last month; spending on goods fell 0.6%.
“The U.S. consumer has an itch to spend, the means to do so and fewer health reasons not to indulge,” said Gregory Daco, chief U.S. economist for Oxford Economics.
Americans are well-positioned to continue spending despite a drop in income last month. Household income fell 13.1% in April, the biggest drop on record, though the decline followed a surge the prior month due to the effects of stimulus payments that went out earlier this year. Income rose sharply in March as the government sent most households $1,400 checks as part of Covid-19 stimulus efforts.