Consumer Spending Falls in April, First Drop in Nearly a Year

BOZEMAN, MT - MAY 18: Pedestrians pass by the front window display at Meridian, a downtown boutique on Main Street after shopping for clothes on May 18, 2013 in Bozeman, Montana. Meridian underwent construction and just reopened. Photo by Ann Hermes/The Christian Science Monitor
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By Lucia Mutikani

WASHINGTON -- U.S. consumer spending fell in April for the first time in almost a year and inflation pressures were subdued, pointing to a slowdown in economic activity, which should allow the Federal Reserve to maintain its monetary stimulus for a while.

The Commerce Department said Friday consumer spending fell 0.2 percent, the weakest reading since May last year, after edging up 0.1 percent in March. Economists had expected a 0.1 percent gain.

Consumer spending, which accounts for about 70 percent of U.S. economic activity, was held down by weak demand for utilities and a drop in receipts at gasoline stations on the back of a fall in gasoline prices at the pump.


When adjusted for inflation, spending nudged up 0.1 percent last month after rising 0.2 percent. The sixth straight month of gains in the so-called real consumer spending came as a key inflation gauge fell in April by the most since July last year, pushed down by declining gasoline prices.

That modest rise suggested that consumer spending would slow in the second quarter after accelerating at a 3.4 percent annual pace in the first three months of the year.

"Consumer spending is on a very modest track because income is not growing very much. Wage gain is very low even though job growth has picked up," said Kevin Logan, chief U.S. economist at HSBC Securities in New York.

U.S. Treasuries prices extended gains after the data, while stock index futures were lower in morning trade.

The economy has been hit by higher taxes and deep government spending cuts as the government tries to slash its budget deficit.

It grew at a 2.4 percent pace in the January-March period, but is expected to slow to a rate of between 1.5 percent and 2.2 percent this quarter because of the government budget cuts, which are already putting a strain on manufacturing.

Lack of income growth as job gains remain moderate is weighing on domestic demand. Last month, income was flat and the saving rate was unchanged at 2.5 percent.

The weak demand tone was underscored by very benign inflation pressures in April.

A price index for consumer spending fell 0.3 percent last month after dipping 0.1 percent in March. A core reading that strips out food and energy costs was flat after rising 0.1 percent the prior month.

During the past 12 months, inflation has risen just 0.7 percent, the smallest gain since October 2009 and pushing further below the Federal Reserve's 2 percent target. The index had increased 1.0 percent in the period through March.

Core prices were up 1.1 percent, the smallest rise since March 2011 and slowing from 1.2 percent in March.

The weak spending and the lack of inflation pressures should dampen market speculation the U.S. central bank might start scaling back monetary easing later this year.

Federal Reserve Chairman Ben Bernanke said last week a decision to start tapering the $85 billion in bonds the Fed is buying each month could come at one of its "next few meetings" if the economy appeared set to maintain momentum.

"Certainly, the inflation data suggest the Fed at the moment should not be overly concerned about inflation," Logan said. "That gives them plenty of scope to continue QE."


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8 Comments

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h.hughjardon

whackobachman
nYou forgot the house republicans last week wanted to get rid of overtime pay.Don’t Let Republicans Cut Your Overtime Pay
Comments05/07/2013
Mike Hall
A bill pushed by the Republican leadership in the U.S. House that will let employers make you work more for less pay will be up for a vote on Wednesday. Call Congress today and tell your representative to oppose H.R. 1406: 1-888-866-2561
xxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxx

Have you even read the bill spongebob? You are so effing dishonest.

Here's the full context of the bill folks...not what spongebob and this commie blogger mike hall choose to cherry pick and spoon feed dumb people.

http://www.govtrack.us/congress/bills/113/hr1406/text

Employees.get the choice of time off or monetary pay for overtime worked. It has a sunset clause and is tracked for usage, compliance, etc.

People like this multi-screen name punk and the left will stop at nothing to further their agenda and gain gain political power. Just look at the IRS and press scandals this administration is involved in.

June 01 2013 at 6:00 PM Report abuse -1 rate up rate down Reply
1 reply to h.hughjardon's comment
h.hughjardon

And what do you care anyway spongebob.....you choose not to have a job.

June 01 2013 at 6:02 PM Report abuse -1 rate up rate down Reply
bchrist751

The Obama tax increases are taking money away from consumers....Now add to that the out of pocked cost of Obama care on consumers by higher taxes, and reduced hrs of work.

May 31 2013 at 10:23 AM Report abuse -2 rate up rate down Reply
2 replies to bchrist751's comment
whackobachmann

You forgot the house republicans last week wanted to get rid of overtime pay.


Don’t Let Republicans Cut Your Overtime Pay

Comments

05/07/2013

Mike Hall

A bill pushed by the Republican leadership in the U.S. House that will let employers make you work more for less pay will be up for a vote on Wednesday.

Call Congress today and tell your representative to oppose H.R. 1406: 1-888-866-2561.

The Obama administration said this morning that if the legislation ever reached the White House it would have a date with the president’s veto pen. In a statement of administration policy, the Office of Management and Budget said:
Sign up to receive AFL-CIO Now blog alerts>>

This legislation undermines the existing right to hard-earned overtime pay, on which many working families rely to make ends meet, while misrepresenting itself as a workplace flexibility measure that gives power to employees over their own schedules.

If the bill’s backers were truthful, the legislation should be called “The Employers Flexibility Act,” says Judith Lichtman, senior adviser with the National Partnership for Women & Familie

May 31 2013 at 10:38 AM Report abuse +1 rate up rate down Reply
1 reply to whackobachmann's comment
h.hughjardon

Was this the bill that allows employees to take.comp time instead of pay for OT work? The bill that gives the employee the choice of when to take the time?

June 01 2013 at 5:28 PM Report abuse -1 rate up rate down
whackobachmann

You forgot the house republicans last week wanted to get rid of overtime pay.


Don’t Let Republicans Cut Your Overtime Pay

Comments

05/07/2013

Mike Hall

A bill pushed by the Republican leadership in the U.S. House that will let employers make you work more for less pay will be up for a vote on Wednesday.

Call Congress today and tell your representative to oppose H.R. 1406: 1-888-866-2561.

The Obama administration said this morning that if the legislation ever reached the White House it would have a date with the president’s veto pen. In a statement of administration policy, the Office of Management and Budget said:
Sign up to receive AFL-CIO Now blog alerts>>

This legislation undermines the existing right to hard-earned overtime pay, on which many working families rely to make ends meet, while misrepresenting itself as a workplace flexibility measure that gives power to employees over their own schedules.

If the bill’s backers were truthful, the legislation should be called “The Employers Flexibility Act,” says Judith Lichtman, senior adviser with the National Partnership for Women & Familie

May 31 2013 at 10:38 AM Report abuse +1 rate up rate down Reply
2 replies to whackobachmann's comment
whackobachmann

We house republicans would also like to roll back child labor laws. Do you think the American people will notice that we don't stand for the American worker ? We republicans only support corporate interest.

May 31 2013 at 10:43 AM Report abuse +1 rate up rate down
whackobachmann

We house republicans would also like to roll back child labor laws. Do you think the American people will notice that we don't stand for the American worker ? We republicans only support corporate interest.

May 31 2013 at 10:43 AM Report abuse +1 rate up rate down