Personal Income Flat, Spending Down
Friday May 30, 9:00 am ET
WASHINGTON (Reuters) - U.S. consumer spending dipped slightly in April, the government said on Friday in a report highlighting the tepid growth pace of the U.S. economy.
The Commerce Department said personal spending fell by 0.1 percent after an upwardly revised 0.8 percent gain in March. Personal income was unchanged in April, the first time since July 2002 that incomes have not posted a monthly gain.
The report renews worries that consumer spending, which accounts for about two-thirds of U.S. economic activity, may be faltering. Robust spending, along with a vibrant housing market, have been among the economy's few areas of strength.
Wall Street analysts had expected incomes to post a flat reading in the month, and spending to have gained 0.1 percent.
The report also showed data that could stoke concerns about deflation, a general fall in prices usually accompanied by a severe slide in economic activity.
The price index for personal spending, an inflation measure closely watched by Federal Reserve officials, fell by 0.2 percent in April. That was the largest decline since September 2001, when it slid by 0.5 percent. Excluding volatile food and energy prices, the index was up 0.1 percent.
"We are starting the second quarter on a weak footing in terms of consumer spending, which may begin to erode the estimates for second quarter (gross domestic product) growth," said Pierre Ellis, senior international economist.
"The erosion of the growth outlook is a very serious matter for the Fed because it implies greater and greater slack in the economy which exerts increasing downward force on inflation and threatens deflation sooner than had been imagined," he said.
In recent weeks, Fed officials have sought to soothe deflation fears by saying they are on guard against it, and that the risk the United States could see deflation is remote.
Elsewhere in the report, the personal saving rate -- the percentage of income left over after expenses -- rose to 3.7 percent from 3.5 percent in March.
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