Consumer Spending Falls for 1st Time in a Year as Income-Growth Slows

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 percent, last month, the Commerce Department said Friday.

The decrease came after strong spending growth in March, revised up slightly Friday to a 1 percent 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 percent last month.

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

Incomes rose 0.3 percent, compared to a 0.5 percent increase in March.

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

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

The annual figure is nearing the Federal Reserve’s target for 2 percent 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 percent from January through March, down from 3.3 percent in the fourth quarter but not a major drop off. Overall, the economy contracted 0.1 percent in the first quarter.

This article appeared in print in the June 2nd, 2014 edition of Hamodia.