US household incomes, spending both decline in April

31 May 2013 18:21  [Source: ICIS news]

WASHINGTON (ICIS)--US household incomes and spending both declined in April from March, the Commerce Department said on Friday, the second monthly downturn since the beginning of 2013 and perhaps a sign of consumer uncertainty.

In its monthly report on personal income and outlays, the department said that household earnings fell by $5.6bn (€4.3bn) in April from March, a narrow decline that barely registered at less than 0.1%.

But that modest downturn in personal income is in contrast to gains of 1.2% and 0.3% seen in February and March respectively.

Those income improvements in February and March were welcome in the wake of January’s sharp 4.4% drop in household earnings, indicating that consumers had recovered from the negative impact of higher taxes that kicked in on 1 January.

Although far more modest, the new earnings and spending decline in April could signal renewed caution among consumers.

Perhaps reflecting the income decline, US consumer spending - what the department calls personal consumption expenditures (PCE) - also was down in April, falling by $20.5bn or 0.2%.

That contrasts with the 0.8% and 0.1% increases in PCE seen in February and March respectively.

US income earners also put a bit more money into savings accounts last month.

While the increase in savings was relatively modest - $306.9bn in April compared with $301.4bn in March - it could be another sign that consumer concerns about possible rainy days ahead have increased.

However, the slight declines in earnings and spending last month could be just an anomaly, a one-month blip that does not foretell a trend.

The April downturn is in stark contrast to a recent report showing a sharp gain in consumer confidence, which reached a five-year high in May and matched levels not seen since before the 2008-2009 recession.

That report by the Conference Board suggested that “consumer confidence is on the mend” and has recovered from income hits in January - the 4.4% decline - related to increased payroll taxes, the fiscal cliff and reduced government spending.

Consumer confidence is critical to the health of the US economy because household spending is the principal driving engine of the nation’s economy, accounting for as much as 70% of all production and commerce.

($1 = €0.77)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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