Consumer Spending Hits Four Month High

The United States Department of Commerce says that numbers show that consumer spending is up right now, following a consistent rebound originally expected in April.  Through the first quarter, softer consumer spending was a big drag on overall economic growth for the country but the bump in April suggests that the second quarter will find some recovery.

More specifically, the numbers say that personal spending and personal incomes rose by roughly 0.4 percent with real personal spending—in March—has been revised upward from 0.3 percent to 0.5 percent.  Not counting volatile costs from the food and energy category, core PCE deflation rose by 1.7 percent, on track with analyst forecasts. Also, personal savings—as a measure of a share of disposable income—held strong at 5.3 percent for the third straight month.

Indeed, Mitsubishi UFG Union Bank, NY, chief financial economist Chris Rupkey comments, “Consumers are back out in force this quarter, spending their hearts away after taking the first quarter of the year off.”

This is an important marker, as consumer spending makes up about two-thirds of the whole US economy.  Between January and March, this growth rate was only about 0.6 percent, which is the worst performance since late in 2009; helping bolster some movement after a less-than-stellar 1.2 percent annual growth rate in the whole of the first quarter. This, of course, is affecting the Fed’s policy making decisions, as they had originally believed the present economic weakness was “likely to be transitory,” indicating they were prepared to roll out a small interest rate increase in the benchmark rate if the economic data would bulk up according to their estimates.

Rupkey continues, “Fed officials can continue with their gradual pace of rate hikes as the economy remains on course for stronger growth this quarter and throughout the rest of the year.”

The Labor Department is also now looking towards another key report, due Friday, which should show solid growth of approximately 185,000 net new jobs in the month of May.

Officials with the Federal Reserve have said they want to see core prices rise by a healthy and steady 2 percent every year.

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