The Bureau of Economic Analysis will release the personal income report from March on Friday, which is expected to show the most promising sign of economic recovery since the onset of the COVID-19 pandemic. 

Impact of Stimulus Checks 

The consensus amongst economists anticipates a personal income growth of at least 20%. The release will account for the $1,400 stimulus checks which a majority of Americans received. March’s report will be the third release to be heavily impacted by federal aid in the form of stimulus payments, and likely the most impactful. Previous stimulus payments came during periods of higher unemployment and more restrictive shutdown orders, that along with the larger individual checks American’s received are expected to contribute to the growth. Personal income gains reached 10.1% in January after a more modest aid package. The larger stimulus checks, along with a better job outlook have March poised for a far stronger gain. 

“The sheer size of the stimulus package will be reflected in the report, with a majority of Americans getting checks, we have seen that money being pumped back into the economy, ” said Michael Englund, chief economist for Action Economics. Englund is projecting a March personal income increase of 21.2%. 

Previous stimulus checks during the pandemic have led to high spikes of growth in personal income, March 2021 is expected to be no different. 

Consumer Spending 

The influx of cash from stimulus checks along with having more outlets to spend their checks is expected to drive growth in consumer spending. Other metrics have already pointed to that confidence as March saw retail sales rise 9.8%. Some of the biggest gains have come from clothing stores with a rise in 18.3%. This all points to Americans’ appetite to leave the house more. Unlike the aftermath of previous stimulus payments, dining, recreation, hospitality have all experienced a surge since the vaccine became more available. As a semblance of normalcy has resumed, experts believe consumer’s spending habits will follow. 

Better Weather 

Last month personal income saw a steep decline of 7.1%, as February was the only month of the first quarter when Americans did not receive stimulus payments. However, the nasty winter storms, which shut down much of the nation towards the end of the month played a role as well. The weather created more pent-up demand for spending into March. Additionally, sectors like construction and maintenance saw pent-up demand for their services in the weeks after the storms, putting more people back to work, especially in Texas where massive damage was incurred. 

Personal Savings

American’s personal savings rates have been extraordinarily high in the wake of stimulus payments. After the initial package in April 2020, the savings rate was 33.7%, the most recent package triggered a rate of 19.8%. Monthly pre-pandemic personal savings rates in the high single digits for the latter half of the decade. This month’s savings rate will be one to watch, with American’s concerns about the future beginning to ease from the vaccination effort. 

It is likely that consumers will make more use of their stimulus check than they have previously, but with these checks being the largest level of aid thus far, Americans are still expected to pocket much of the payments. “These checks were so widespread, that some who received them, really didn’t need them, as a result, many were able to pocket them this time,” said Scott Brown, chief economist for Raymond James. 

Impact of Reopening 

March saw a dramatic increase in businesses that were forced to shut down and come closer to returning to a level of normalcy in their operations. More Americans are returning to work and receiving a paycheck, most notably in the restaurant and hospitality industry. Many southern states began the transition to a full reopen last month, and even more COVID cautious states in the northeast moved closer with expanded indoor capacity limits, leading to higher demand for a workforce. Moving forward, the nation will heavily depend on this factor to continue to drive economic growth into the summer, with hopefully a majority of Americans getting vaccinated in the coming months.

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