US consumer spending weak, but income gains robust

Consumer spending was flat in April after a revised 0.5 percent increase in March, the Commerce Department reported Monday. Personal income rose a healthy 0.4 percent after being unchanged in March.

Richard Vogel/AP/File
A shopper pays for his produce at a farmers market in downtown Los Angeles. The Commerce Department reported flat consumer spending, which accounts for 70 percent of economic activity, on Monday, June 1, 2015.

 U.S. consumer spending in April posted the weakest performance in three months, but a solid gain in income growth should help boost spending in the future.

Consumer spending was flat in April after a revised 0.5 percent increase in March, the Commerce Department reported Monday. The March advance had been the biggest gain since last August. Personal income rose a healthy 0.4 percent after being unchanged in March.

The flat reading for consumer spending in April had been expected given weakness previously reported in retail sales and auto sales for the month. Economists, however, forecast that spending will rebound in coming months. Strong gains in employment should translate into more confident consumers who are willing to spend more.

Consumer spending is closely watched because it accounts for 70 percent of economic activity.

The overall economy shrank in first three month of the year, with the gross domestic product contracting at an annual rate of 0.7 percent. Economists are forecasting GDP growth will rebound to around 2.5 percent in the current April-June quarter.

Consumer spending slowed to growth of just 1.8 percent in the first quarter, down from spending growth of 4.4 percent in the fourth quarter. The frigid cold in many parts of the country kept shoppers away from the malls. With the arrival of spring and warmer weather, analysts are looking for spending to rebound.

The weakness in April, the first month in the new quarter, reflected big declines in spending on both durable goods such as autos and nondurable goods such as clothing and food. Spending on services, which covers utility bills and rent, edged up 0.2 percent.

With income growing and spending flat, the personal saving rate jumped to 5.6 percent of after-tax incomes, compared to 5.2 percent in March.

Economists believe consumers will start spending the savings they have accumulated from the big drop in gas prices. While the cost of filing up the tank has risen a bit in recent weeks, prices are still nearly $1 below the levels of a year ago.

Recent employment gains are expected to bolster spending. The economy created 223,000 jobs in April, pushing the unemployment rate down to a nearly seven-year low of 5.4 percent.

The Federal Reserve has kept a key interest rate at a record low near zero since December 2008 in an effort to combat high unemployment. Even though the job market has revived, the Fed has left rates alone, in part because inflation for nearly three years has been running below the Fed's 2 percent target.

Many economists believe the central bank, which next meets on June 16, will delay its first rate hike until September.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.