US Consumer Spending Stalled in April

Consumer purchases unexpectedly stalled in April as Americans used income gains to shore up savings, raising the risk the biggest part of the economy may take time to gain momentum after a slow start to the year.

The unchanged reading in purchases followed a 0.5 percent gain the prior month that was larger than previously estimated, Commerce Department figures showed Monday in Washington. The median forecast in a Bloomberg survey of 79 economists called for a 0.2 percent rise. Earnings increased 0.4 percent, more than projected, and the saving rate climbed.

Consumers, who’ve been using the money freed up by low gasoline costs to pay down debt or rebuild their balance sheets, would be more inclined to shop as wages accelerate. Sustained improvement in household spending, which accounts for almost 70 percent of the economy, is needed to ensure growth rebounds as Federal Reserve officials project.

“Spending got off to a weak start this quarter,” Ryan Sweet, senior economist at Moody’s Analytics Inc. in West Chester Pennsylvania, said before the report. “A weak April sets a higher hurdle to achieve many economists’ forecasts for the second quarter. The labor market is doing well but faster wage growth is still the missing piece.”

Projections for spending ranged from no change to a gain of 0.3 percent, according to economists surveyed by Bloomberg. The previous month’s reading was initially reported as a 0.4 percent rise. The revised March increase was the biggest since August.

The Bloomberg survey median called for incomes to rise 0.3 percent. The prior month was unrevised at little changed.


Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell