Business

Consumer spending falls for 1st time in a year as income growth slows

The 0.1% drop in consumer spending last month followed a strong March gain.
Income growth slowed to 0.3% in April, possibly fueling the drop in spending.

Americans surprisingly spent less in April, the first monthly drop in a year and a potentially worrisome sign for an economic rebound after a slow winter.

Consumer spending was down $8.1 billion, or 0.1%, last month, the Commerce Department said Friday.

The decrease came after strong spending growth in March, revised up slightly Friday to a 1% gain. That was the best performance since August 2009.

Economists did not expect consumers to keep up the March pace. But forecasts still called for spending to grow by 0.2% last month.

Part of the reason for the decline, the first since a 0.2% drop in April 2013, could be that personal income growth was down.

Incomes rose 0.3% compared to a 0.5% increase in March.

While consumers spent less in April, they saved more. The savings rate increased to 4% from 3.6% in March.

A key measure of inflation showed prices rose 0.2% last month, the same as in March. But for the previous 12 months, the measure was up 1.6%, the most since November 2012.

The annual figure is nearing the Federal Reserve's target for 2% price growth.

Consumer spending accounts for about two-thirds of U.S. economic activity. And despite severe weather in much of the country, consumers mostly kept opening their wallets during the winter.

Spending increased 3.1% from January through March, down from 3.3% in the fourth quarter but not a major drop off. Overall, the economy contracted 0.1% in the first quarter.

Copyright © 2015, Los Angeles Times
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