Accessibility/Mobile Features
Skip Navigation
Skip to Content
Editorial News
Classified Sites

The Canadian Press - ONLINE EDITION

US consumer spending slipped in April, but economic rebound still on track

FILE - In this Friday, Nov. 23, 2012 file photo, a cashier rings up a cash sale at a Sears store, in Las Vegas. The Commerce Department reports how much consumers spent and earned in April, and The University of Michigan issues its index of consumer sentiment for May, on Friday, May 30, 2014. (AP Photo/Julie Jacobson, File)

Enlarge Image

FILE - In this Friday, Nov. 23, 2012 file photo, a cashier rings up a cash sale at a Sears store, in Las Vegas. The Commerce Department reports how much consumers spent and earned in April, and The University of Michigan issues its index of consumer sentiment for May, on Friday, May 30, 2014. (AP Photo/Julie Jacobson, File)

WASHINGTON - U.S. consumers cut back on spending in April for the first time in a year, taking an unexpected pause after a big jump during the previous month. The results, however, are unlikely to derail an expected spring rebound in the economy.

Consumer spending, which accounts for 70 per cent of overall economic activity, fell 0.1 per cent in April, the Commerce Department said Friday. The drop was the first in 12 months. But it followed a 1 per cent surge in spending in March, which marked the biggest increase in more than four years.

"It is obvious that after an unseasonably colder January and February consumers came out with a vengeance in March," Chris Christopher, an economist at IHS Global Insight, said in a note to clients. "So, April's poor showing on the spending front is payback for a strong March."

The latest figure reflects reductions in durable goods purchases such as autos and in services such as heating bills. While disappointed, analysts say the results don't change the broader upward trajectory of the economy and predict consumer demand to bounce back in May.

An "improving job market should support stronger spending in coming months," Jennifer Lee, senior economist at BMO Capital Markets, wrote in a research note.

Friday's government report also showed that income rose 0.3 per cent in April after advancing 0.5 per cent in March. That marks the fourth consecutive monthly climb. The economy has been generating jobs at a solid pace in recent months, including a gain of 288,000 jobs in April, the strongest uptick in hiring in two years.

With spending down and Americans were earning more, the saving rate rose in April to 4 per cent of after-tax income, up from a saving rate of 3.6 per cent in March.

Inflation, as measured by a gauge tied to spending, showed prices rising 1.6 per cent from a year ago, up from a 1.1 per cent year-over-year price gain in March. However, even with the increase, inflation remains below the Federal Reserve's 2 per cent target.

In April, consumers reduced spending on durable goods such as autos by 0.5 per cent. The drop followed a big 3.6 per cent jump in durable good spending in March. Consumers boosted spending on nondurable goods a slight 0.1 per cent while trimming spending on services by 0.1 per cent. Spending on services, which includes utility bills, had been rising rapidly during the winter, reflecting higher heating costs due to the severe cold in many parts of the country.

Consumer spending remained strong through the first quarter, rising at an annual rate of 3.1 per cent. But much of that strength came from increased health care spending, reflecting new enrollments through the Affordable Care Act.

Friday's data follows news the previous day that the overall economy shrank 1 per cent in the January-March quarter. It was the first contraction in three years and was blamed on a number of special factors including an unusually harsh winter.

Economists estimate that further gains in hiring will boost consumer confidence and spending in the coming months, driving overall economic growth as measured by the gross domestic product. Some analysts say GDP growth could hit an annual rate of 4 per cent in the second quarter and top 3 per cent in the second half of this year.

  • Rate this Rate This Star Icon
  • This article has not yet been rated.
  • We want you to tell us what you think of our articles. If the story moves you, compels you to act or tells you something you didn’t know, mark it high. If you thought it was well written, do the same. If it doesn’t meet your standards, mark it accordingly.

    You can also register and/or login to the site and join the conversation by leaving a comment.

    Rate it yourself by rolling over the stars and clicking when you reach your desired rating. We want you to tell us what you think of our articles. If the story moves you, compels you to act or tells you something you didn’t know, mark it high.

Sort by: Newest to Oldest | Oldest to Newest | Most Popular 0 Commentscomment icon

You can comment on most stories on brandonsun.com. You can also agree or disagree with other comments. All you need to do is register and/or login and you can join the conversation and give your feedback.

There are no comments at the moment. Be the first to post a comment below.

Post Your Commentcomment icon

Comment
  • You have characters left

The Brandon Sun does not necessarily endorse any of the views posted. Comments are moderated before publication. By submitting your comment, you agree to our Terms and Conditions. New to commenting? Check out our Frequently Asked Questions.

letters

Make text: Larger | Smaller

Brandon Sun Business Directory
Sudden Surge: Flood of 2014
Opportunity Magazine — The Bakken
Why Not Minot?
Welcome to Winnipeg

Social Media