Personal spending unchanged in April

By Annalyn Censky, staff reporter


NEW YORK (CNNMoney.com) -- Personal spending was flat in April, after six months of increases, while income rose, according to a government report released Friday.

The Commerce Department said individual spending rose less than 0.1%, or $4 billion, last month after an upwardly revised 0.6% increase in March. Economists surveyed by Briefing.com were expecting a 0.3% increase.

Personal income climbed 0.4%, or $54.4 billion, in April following an upwardly revised 0.4% rise the month before.

The news that growth in income outpaced spending comes after two months of just the reverse: Through February and March, Americans were increasing their spending at a faster rate than their incomes could keep up.

That trend possibly indicated that the increase in personal spending was buoyed by homeowners who defaulted and, in light of no longer paying their mortgages, were having more money to spend, said Daniel Penrod, a senior industry analyst for the California Credit Union League.

Friday's report shows consumers are now taking a step back to moderate their spending and build up their savings, which may subdue the robust recovery some were hoping for but provide for more sustainable growth over the long term, said Adrian Cronje, chief financial officer of investment firm Balentine.

"The recovery has been impressive, but there are significant headwinds facing it. And in the last few weeks and months, there's been a lot that's caused people to sit back and take a breath," Cronje said.

The report showed that Americans saved a slightly larger chunk of their disposable income in April. Personal savings as a percentage of disposable personal income, known as the savings rate, was 3.6% in April, compared with 3.1% in March. That's the first increase after three months of declines.

Meanwhile, the core personal consumption expenditures index -- the report's closely watched year-over-year inflation gauge that excludes food and energy -- was also flat. Economists expect that until prices inch above 2%, the Federal Reserve's focus will remain on tackling the high unemployment rate.

The report came two days after the Commerce Department revised its gross domestic product, or GDP, measure downward to a 3% annual rate from 3.2% for the first three months of 2010.

The GDP figure, which is considered the broadest measure of economic activity, means the economy grew in the first quarter, but not quite as much as the government originally reported. To top of page

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