No Pictures of Asia in Consumers’ Wallets
Consumers spent at a healthy clip in April, suggesting robust domestic demand was so far offsetting any economic slowdown from weaker Asian exports, according to a Commerce Department report released Friday.
Personal income also advanced last month, but not enough to keep up with spending. Total spending on everything from new cars to food to medical services increased 0.5% to a seasonally adjusted annual rate of $5.72 trillion, after a matching 0.5% rise in March.
Overall, personal income increased 0.4% in April, as did income’s largest component: wages and salaries. A 0.7% rise in service industry wages helped offset the decline in manufacturing, where some industries have been hurt by the loss of export sales to economically troubled Asia. Factory payrolls declined 0.2%, the Commerce Department said.
Separately Friday, Chicago purchasing managers reported that their May index of activity slowed for a second straight month and that production, new orders and employment all weakened from April. Inventories of unsold goods rose sharply.
The regional purchasing managers’ Chicagoland Business Barometer eased to 56.3 in May from 58.6 in April, still above 50, indicating expansion.
Tax payments surged 0.6% in April, helping the federal government post a record budget surplus for the month. After-tax income, adjusted for inflation, rose just 0.2%.
Personal consumption expenditures, meanwhile, jumped 0.5% for the second consecutive month.
The fact that spending advanced faster than income produced the fourth drop in the national savings rate--savings as a percentage of after-tax income--in five months.
“The decline in the savings rate to 3.5% puts it near a record-low level,” economist Gerald D. Cohen of Merrill Lynch said. “We do not expect it to fall further. Thus, we think that spending growth is not at a sustainable level.”
The news on savings came as the Clinton administration prepared for next week’s two-day National Summit on Retirement Savings, aimed at encouraging Americans to save more.
Analysts said the savings rate has been depressed during the last year because of the way the government accounts for Americans spending part of their stock market gains. The spending counts as reduced savings, but gains plowed back into the market don’t count as new savings.
In addition to wages and salaries, income gains also were recorded for business owners, farmers, transfer payments such as Social Security and welfare, interest, dividends and rental income.
Spending was strongest for durable goods--big-ticket items such as autos and appliances expected to last three or more years. It rose 0.7%. Nondurable-goods purchases increased 0.6%, and spending on services rose 0.4%.
*
Associated Press and Reuters were used in compiling this report.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Personal Income
Seasonally adjusted annual rate, in trillions of dollars:
April: $7.18 trillion
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Personal Spending
Seasonally adjusted annual rate, in trillions of dollars:
April: $5.72 trillion
