It was also a reversal of the previous month’s decline and more than economists had predicted. Disposable income rose 23.6%, just under $ 4.2 trillion, which is also a record.
This rise in income was largely due to increased government benefits, including stimulus checks, the BEA said.
Consumer sentiment is also improving. The results of the University of Michigan survey released on Friday showed general consumer sentiment, perceptions of current economic conditions and expectations for the future all improved in April. This was due “to a growing sense that the upward momentum for jobs and incomes will persist,” said Richard Curtin, chief economist for the consumer survey.
All the increased spending drives up prices.
This is an expected effect, but some investors and economists fear that inflation could skyrocket and the economy will overheat.
Economic activity is strongly stimulated by the government’s record stimulus programs and the gradual return to business as usual as the vaccine rollout continues. This is why the prices are increasing.
Consumer prices climbed 0.5% in March, according to Friday’s report, but year over year, the PCE price index is now up 2.3%.
If inflation rises too quickly, the Federal Reserve, whose mission is to keep inflation stable, may have to turn around its monetary policy.