Personal Income and Spending Up

Washington, DC, May 28–Personal incomes grew in April at twice the rate of spending, boosting the savings rate to the highest level since last summer.

Personal income increased by 0.6% last month, after an unrevised 0.4% gain in March, the Commerce Department said Friday. Spending advanced 0.3%, after rising a revised 0.5%.
Economists had expected income to grow by 0.5%, and for spending to climb by 0.2%, according to a survey by Dow Jones Newswires and CNBC.

The increase in income was the largest monthly gain since November’s 0.6% advance. Disposable personal income, or income after taxes, climbed 0.5%, following a 0.4% advance in March.

Consumer spending is important to economic growth; it is responsible for about two-thirds of gross domestic product.
Spending on durable goods, big-ticket items such as cars and appliances, rose 0.8%; outlays on nondurable items such as food and clothing slipped 0.1%. Spending on services grew
0.5%.

Personal saving as a percentage of disposable personal income was 2.4% in April, the highest rate since the 2.7% recorded in August 2003.

Inflation measures in the report were mixed. A price index for personal-consumption expenditures excluding food and energy rose in April from March at a 0.1% rate, lower than February’s 0.2% increase.

In annual terms, however, personal-consumption expenditures less food and energy rose 1.4% in April, higher than March’s year-over-year climb of 1.3%.