OUR THOUGHTS ON:

Household Income Rises, Yet Nobody's Spending

Retail

By Donald Applegarth

U.S. Income Rises, Yet Spending Remains Flat as Consumers Increase Savings

The consumer spending rebound that many anticipated would begin in April continues to be somewhat AWOL. Many economists expected April to ring in a Spring of increased consumer spending, particularly after a brutal winter adversely impacted shopping in the first quarter. However, recent data suggests that households remain reluctant to spend freely despite healthy gains in income, as well as gas prices that remain notably lower than this time last year. The Commerce Department indicated that consumer spending was flat in April, which is the weakest reading in three months (after March’s numbers were revised to reflect an additional .5% increase). Personal income showed a healthy .4% increase. The net impact of an increase in income and flat consumer spending, the personal savings rate jumped to 5.6% - the second highest level since December 2012. Are consumers tucking dollars away for major expenditures, or simple changing their savings plan in anticipation of a slower economy? The answer may be found in numbers for May and June, and we’ll continue to monitor them.

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