US consumer spending muted
By Martin Crutsinger |
May 28, 2011, Saturday
|
Print Edition
Print Edition
AMERICAN consumers spent more in April but much of the rise was eaten up by higher food and energy prices. After discounting for the jump in prices, spending barely budged and after-tax incomes were flat for a second straight month.
Consumer spending in the United States rose 0.4 percent, reflecting a surge in the category that covers food and gasoline, areas which showed big price gains last month, the Commerce Department reported yesterday. Excluding price changes, spending rose a much smaller 0.1 percent.
Incomes rose 0.4 percent but after-tax incomes adjusted for inflation were flat for a second straight month.
Analysts are worried that weak income growth and big gains in gasoline and food prices are leaving consumers with little left to spend on other products. That could dampen economic growth. Consumer spending is closely watched because it accounts for 70 percent of economic activity.
Paul Dales, senior United States economist at Capital Economics, said that the income and spending data in April painted a "weak picture" of household finances. "Unless incomes rebound sharply, something we believe is unlikely, real consumption growth will remain subdued," he said.
The savings rate was unchanged at 4.9 percent of after-tax incomes, the same as March. Both months represented the smallest savings rate since October 2008, the month the country was plunged into a deep financial crisis which contributed to the worst recession since the 1930s. During the recession, Americans worked to build up savings out of concerns that they needed a deeper cushion in the face of job layoffs. The savings rate was as high as 8.2 percent in May 2009, the month before the recession ended.
The government reported on Thursday that the overall economy grew at an annual rate of just 1.8 percent in the January-March period, sharply lower than the 3.1 percent growth in the previous quarter.
Consumer spending in the United States rose 0.4 percent, reflecting a surge in the category that covers food and gasoline, areas which showed big price gains last month, the Commerce Department reported yesterday. Excluding price changes, spending rose a much smaller 0.1 percent.
Incomes rose 0.4 percent but after-tax incomes adjusted for inflation were flat for a second straight month.
Analysts are worried that weak income growth and big gains in gasoline and food prices are leaving consumers with little left to spend on other products. That could dampen economic growth. Consumer spending is closely watched because it accounts for 70 percent of economic activity.
Paul Dales, senior United States economist at Capital Economics, said that the income and spending data in April painted a "weak picture" of household finances. "Unless incomes rebound sharply, something we believe is unlikely, real consumption growth will remain subdued," he said.
The savings rate was unchanged at 4.9 percent of after-tax incomes, the same as March. Both months represented the smallest savings rate since October 2008, the month the country was plunged into a deep financial crisis which contributed to the worst recession since the 1930s. During the recession, Americans worked to build up savings out of concerns that they needed a deeper cushion in the face of job layoffs. The savings rate was as high as 8.2 percent in May 2009, the month before the recession ended.
The government reported on Thursday that the overall economy grew at an annual rate of just 1.8 percent in the January-March period, sharply lower than the 3.1 percent growth in the previous quarter.
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