Consumer Spending Dips; Incomes Flat

From Associated Press

Consumers anxious about their jobs were reluctant to go shopping in April, trimming spending by the largest amount since the beginning of the year.

The Commerce Department reported Friday that spending declined by 0.1% from March, matching a drop registered in January. April’s pullback came after consumers splurged in March, boosting spending by 0.8%.

Americans’ incomes, including wages, interest and government benefits, were flat in April -- compared with a solid 0.4% increase in March -- as the weak job market took a bite out of earnings. Wages and salaries dropped by 0.2% in April from the month before, contrasted with a 0.5% rise in March.

Another report showed that consumer confidence rose in May, but the improvement reflected hopes that the economy would do better in the months ahead. They felt a little less favorably about current economic conditions. The University of Michigan’s consumer sentiment index increased to 92.1 in May from 86.0 in April.


In April, consumers cut spending on nondurable goods, such as food and clothes, by 1.4%, a reversal from March’s 1% rise. Spending on durable goods, such as cars and appliances, rose 1.2% in April, down from a 2.9% increase in March. Spending on services went up 0.3% in April for the second month in a row.

Economists said some of the weakness in consumer spending in April could be explained by falling prices and discounts for some goods and services, lowering the amount spent during the month. When adjusted for price changes, spending nudged up 0.1%, as opposed to dropping by that amount based on the unadjusted figure.

Americans’ disposable incomes, or what’s left after taxes, inched up 0.1% in April, compared with a 0.4% gain in March.

Because disposable incomes went up faster than spending, the nation’s personal savings rate, or savings as a percentage of after-tax incomes, rose to 3.7% in April from 3.5% in March.

A gauge of inflation contained in the report showed prices falling by 0.2% in April.