Author: David Templeton, CFA, Principal and Portfolio Manager
Last week I noted the sharp rise in consumer confidence, and not surprisingly, some of this confidence is likely driven by the massive monetary and fiscal stimulus being pursued by the U.S. in an effort to limit the economic damage from the pandemic. At the end of last week, the Bureau of Economic Analysis reported Disposable Personal Income rose 23.6% on a month over month basis. Also significantly higher is personal savings which equaled $6.04 trillion at the end of March. The below chart shows the significant jump in savings and disposable income as compared to prior periods.
In a Wall Street Journal article ($$) from last week that commented on these figures, the author noted, "The stimulus payments accounted for $3.948 trillion of the overall seasonally adjusted $4.213 trillion rises in March personal income." In other words, the stimulus support represents 93.7% of the absolute dollar increase in personal income. These funds will get spent in future periods and with consumers accounting for nearly 70% of the economy, this provides an additional tailwind for stronger economic growth.
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