WASHINGTON (AP) — U.S. consumer spending plunged 7.5% in March, reflecting the growing impact of the coronavirus pandemic as Americans complied with stay-at-home orders.
The Commerce Department said that the spending plunge was accompanied by a sharp 2% drop in personal incomes in March with both declines attributed to impacts of efforts to deal with the pandemic.
The report said that the country experienced big declines as “consumers canceled, restricted or redirected their spending.”
The government reported Wednesday that the overall economy, as measured by the gross domestic product, shrank at an annual rate of 4.8% in the January-March quarter, led by the biggest quarterly drop in consumer spending since 1980.
Consumer spending accounts for 70% of economic activity and has been the economy's standout performer in recent years. However, with further sharp spending declines forecast, analysts are predicting that GDP will shrink by around 40% in the current April-June quarter, the biggest quarterly decline on record.