Inflation wipes out April spending, income gains
(WASHINGTON) Consumer spending in the United States barely budged in April and growth in personal incomes slowed sharply, even though the government started sending out billions of dollars in economic stimulus payments.
The Commerce Department reported yesterday that consumer spending edged up a small 0.2 per cent in April, just half the 0.4 per cent rise in March. Excluding inflation, the performance was even weaker, showing no gain in spending after excluding price changes.
Incomes rose by just 0.2 per cent in April, just half of the March increase. That performance would have been even weaker without the boost it got as the government began mailing the first of US$106.7 billion in economic stimulus payments.
Consumer spending, which accounts for two-thirds of total economic activity, is being closely watched at present for signs that the economy could be slipping into a recession.
The weak increases in spending and incomes were in line with expectations. Some analysts said that with the economy so feeble at the moment, spending could falter further in coming months.
‘With credit tightening, cash flow being squeezed and confidence near record lows, this will surely continue,’ said Ian Shepherdson, chief US economist at High Frequency Economics.
The Bush administration is hoping that a full-blown recession can be averted with the economic stimulus payments now being mailed out.
The Commerce report said that those payments, which didn’t start until the end of April, totalled US$7.8 billion at an annual rate for that month.
The small 0.2 per cent rise in personal incomes in April was the weakest gain since a 0.2 per cent rise in January. Commerce analysts said it would have been an even weaker 0.1 per cent without the boost received from the economic stimulus payments.
Incomes were depressed because private wages and salaries fell at an annual rate of US$18.2 billion in April, the biggest setback in a year.
For April, consumer prices, measured by an inflation gauge tied to consumer spending, rose by 0.2 per cent, down from a 0.3 per cent rise in March. However, the rise in inflation was a more modest 0.1 per cent in April when volatile food and energy costs are excluded. — AP
Source : Business Times - 31 May 2008
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