Per Reuters, the personal consumption expenditures (PCE) price index, has jumped 3.1 percent over the course of the last year, the largest annual gain in nearly 30 years. A
“The decrease in personal income in April primarily reflected a decrease in government social benefits,” the government report said. "Within government social benefits, "other" social benefits decreased as economic impact payments made to individuals from the American Rescue Plan Act of 2021 continued, but at a lower level than in March. Unemployment insurance also decreased, led by decreases in payments from the Pandemic Unemployment Compensation program.”
Economists reacted to the report. “Many goods are in short supply amid very strong demand and supply chain disruptions, and some services prices are up sharply as consumers start to go out again,” Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania, told Reuters. “Shortages of labor in some industries are also contributing to higher prices. But many of these factors will prove transitory, and inflation will slow in the second half of 2021.”
The Federal Reserve has been clear that it believes the inflationary trend will be temporary.
In addition, consumer spending slowed in April, after rising sharply in March (by 4.7 percent) as Americans began receiving their stimulus checks from the American Rescue Plan. Also, personal income dropped 13.1 percent after rising 20.9 percent in March.
According to MarketWatch, the drop-off in spending was similar to the ones that were reported immediately following the two stimulus bills that passed in 2020, with spending going way up in one month and then down once the stimulus wore off.
Meanwhile, PYMNTS analyzed the report by noting that the spending numbers showed a shift from goods to services. The site noted the report found a $112.6 billion gain in the services sector, compared with a $32.3 billion decrease in expenditures on goods. The services gains were boosted by spending on restaurants, entertainment and travel.
Meanwhile, Politifact looked at the reasons goods have gotten more expensive this year, under President Biden, than they were last year under former President Donald Trump.
“Economists said that most of the current rise in consumer prices stems from supply chains having to adjust quickly to greater economic activity after increased vaccination has eased the pandemic,” the site said. “Recent price trends for some basic commodities illustrate the ripple effect of the widespread business shutdowns that hit just a little over a year ago, and the resurgence of demand as vaccinations and declining COVID-19 case numbers promise a return to normal business activity.”
Stephen Silver, a technology writer for The National Interest, is a journalist, essayist and film critic, who is also a contributor to The Philadelphia Inquirer, Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.