U.S. personal incomes soared in January as Americans received another batch of pandemic-relief checks, resulting in a spike of total excess personal savings.
According to the Commerce Department report, incomes increased by 10% MoM, the largest gain in nine months. The January jump came after the $900 billion pandemic aid package passed in December. As a reminder, the bill included $600 stimulus checks per American, including adults and children. However, the size of the payment decreased for people who earned more than $75,000 in the 2019 tax year. The check disappeared altogether for those who earned more than $99,000. In addition, the legislation supplemented jobless benefits with an extra $300 a week payment.
Meanwhile, purchases increased 2.4% MoM, pushing personal saving rate up to 20.5%, the highest since May 2020. In this context, U.S. personal savings as a share of nominal GDP will rise again in 1Q21, after reaching a post-war high at the end of 2020 on a 4-quarter moving average basis.