THE OECD has claimed that household income has grown strongly in the first quarter of 2021, driven by significant fiscal expansion in the United States.

Real household income per capita, which provides a better picture of people’s economic well-being than GDP, grew by 5.8% in the OECD area as a whole over the first quarter of 2021. The rise, the largest since 2008, is largely due to the United States’ significant increase in real household income, which is a direct result of the government’s recent fiscal support, including transfer payments made to households. This exceptional rise in incomes was much higher than the 0.5% increase in GDP per capita recorded in the OECD area during the first quarter of 2021.

The result this quarter continues the divergence between GDP per capita and household income per capita since the onset of the COVID-19 pandemic. From Q4 2019 real household income per capita has increased by 8.2% in the OECD area as a whole, while real GDP per capita has declined by 2.7%.

The United States saw significant growth in real household income per capita of 11.7% in the first quarter of 2021. This increase reflects the two separate, broad-based monetary transfers to households, associated with the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 and then the American Rescue Plan Act of 2021. While real GDP per capita also increased in the United States (1.5%) during the first quarter of 2021, the difference between the two indicators, along with the large spike in the United States’ personal saving rate for Q1 2021, reflects a large amount of the additional income was used to improve personal balance sheets, rather than spent on personal consumption.

Movements in real household income per capita also tracked movements in real GDP per capita amongst the other major seven economies, albeit at a smaller scale. Increases in real household income were observed in Canada (1.5%) and Italy (1.0%), which also recorded slight increases in GDP per capita of 1.3% and 0.4% respectively. On the other hand, the declines in real household income recorded in Germany (minus 1.4%), the United Kingdom (minus 1.1%) and France (minus 0.6%) were coupled with decrease in real GDP per capita of (minus 2.0%, minus 1.7% and minus 0.1% respectively).

Across other OECD countries, real household income per capita increased in Denmark (6.7%), Hungary (3.1%) and Poland (2.9%). Conversely, larger falls were recorded in Austria (minus 11.6%), Chile (minus 8.7%), Belgium (minus 2.2%) and Czech Republic (minus 1.7%).

To remove some of the volatility caused by the pandemic, it is worthwhile to look at the cumulative growth of the measures since before any COVID-19 related restrictions were implemented. From this perspective, the United States (16.4%) and Canada (8.2%) have recorded strong growth in real household income per capita, a reflection of the significant fiscal support enacted by the government in these countries. Additionally, due to government support in all major seven economies, the remaining countries have shown only slight declines (or slight increases) in real household income per capita despite negative cumulative growth of GDP per capita across all countries ranging from (minus) 9.4% for the United Kingdom to (minus) 1.3% for the United States.