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Consumer Spending Plunged More Than 13% In April Amid COVID-19 Pandemic


Americans sharply dialed back their spending last month as the coronavirus cast a dark cloud over the U.S. economy. New numbers from the Commerce Department show consumer spending plunged more than 13% in April, the steepest drop since the government began to keep records more than 60 years ago. And it's an ominous signal for a country where consumer spending is the main driver of economic activity. NPR's Scott Horsley joins us. Scott, thanks so much for being with us.


SIMON: Were there particular kinds of spending that dried up in April or was it pretty much across the board?

HORSLEY: It was really widespread, Scott. And, of course, that's partly because there weren't a lot of opportunities to spend money. Lots of restaurants and retail shops were closed. So we saw a sharp drop in just about every kind of purchase. Spending at barbershops and beauty parlors and like was down by 74%. Even health care spending, which is usually pretty recession proof, plunged by 29% last month. A lot of doctors and dentists offices were closed for all but emergency appointments.

SIMON: And how much of the cut in spending seems to have been driven by the massive layoffs?

HORSLEY: You know, there was a pretty steep drop in paychecks last month either because people were laid off or even those that were working had their hours cut in many cases. But what's interesting is that was more than offset by a huge spike in government relief payments. Between the unemployment benefits and those $1,200 stimulus checks that went out, Americans' overall personal income actually shot up last month by more than 10%. We just wound up banking some of that extra income. Overall, Americans saved about a third of their disposable income last month. That's about four times the usual savings rate. Now, some of that might have been involuntary savings by people who just couldn't go out to a movie or a ballgame as they would've liked to do. But it also could reflect people deliberately squirreling money away in anticipation of lean months ahead.

SIMON: And now that more businesses and more states are opening their doors in many parts of the country, should we look for spending to come back, too?

HORSLEY: It's going be interesting to watch. If you think about it, a revival of consumer spending is going to depend on three things. One is the opportunity to spend, two is money in consumers' pockets to spend and then three is just the confidence that it's safe to go out and spend money. We are starting to see more opportunities as businesses open their doors. As far as money in your pockets, you know, some people are going back to work. But with double-digit unemployment, wages are likely to remain depressed for a while to come. And we can't necessarily count on the government to make up the gap with those big relief payments. You know, the $1,200 payments are gone. They're not set to be repeated. And the extra $600 a week in unemployment benefits that Congress authorized during the pandemic, those are due to run out at the end of July. So ability to spend is kind of a question mark.

SIMON: You've also said that consumers have to feel safe about being able to go out and spend money. How do we judge that right now?

HORSLEY: That's the big unknown. And, of course, it depends in part on the path of the pandemic. This is something Federal Reserve Chairman Jerome Powell talked about yesterday in a webcast hosted by Princeton University.


JEROME POWELL: A full recovery of the economy will really depend on people being confident that it's safe to go out and safe to engage in a broad range of economic activities. That's how the economy will recover. And you see people testing the limits now probably every day. All of us are doing things we might not have done two months ago. And you're just seeing how that works.

HORSLEY: We're in the midst of a big national experiment. Some people are going to race back to their favorite restaurant as soon as the doors open. Others are going to be more cautious. And the some of those millions of individual decisions will determine the direction of the economy. We know we're in a deep hole right now. The big question is, how soon can we climb out?

SIMON: NPR's Scott Horsley, thanks so much.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.