Personal Income and Savings Increasing Too

Insights | Personal Income and Savings Increasing Too

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.

Personal Savings and Disposable Personal Income March 2021

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.

HORAN Capital Advisors, LLC is an SEC registered investment advisor. The information herein has been obtained from sources believed to be reliable but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results. Market conditions can vary widely over time and there is always the potential of losing money when investing in securities. HCA and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only and is not intended to provide and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.