WASHINGTON - The first round of economic stimulus checks gave a boost to personal incomes in April but a huge question remains: Will people spend the checks quickly enough to keep the economy afloat?
The Commerce Department reported yesterday that consumer spending barely budged in April, rising 0.2 percent, and income growth was just as weak, also increasing 0.2 percent.
The growth in incomes, held back by four straight months of job losses, would have been just 0.1 percent had it not been for the first wave of economic stimulus payments that the government started sending April 28.
The effect on incomes should be even larger in the May and June reports, reflecting the bulk of the payments. The Treasury Department reported yesterday that 57.4 million payments have been made totaling $50.04 billion, nearly half of the $106.7 billion that will be disbursed this year to 130 million households.
The checks are the centerpiece of a $169 billion stimulus package that Congress passed in February at President Bush's urging with the aim of jump-starting the stalled economy. Analysts said whether they keep the economy out of a recession will depend on how fast people spend the money.
"It will be impressive if consumers can manage to hold on given all the headwinds they are facing," said Mark Zandi, chief economist at Moody's Economy.com in West Chester. "Nothing is going right. Jobs are down, the stock market is wobbly, home prices are plunging and gasoline prices are at record highs."
The problems have pushed consumer confidence to recessionary levels. The Reuters/University of Michigan survey of consumer sentiment dropped for a fourth straight month in May, hitting a 28-year low of 59.8, down from a reading of 62.6 in April. The May level was the lowest since June 1980.