April Spending weak but savings rate rises

April Income rose .4%, in line with expectations but Spending was flat vs a forecasted rise of .3%. With this, the Savings Rate rose to 3.6% from 3.1%. The headline PCE price deflator was unchanged so REAL income and spending was the same as the nominal change. While spending was flat m/o/m, it is still up 4.6% y/o/y relative to a 2.5% y/o/y gain in income. Thus, after seeing a drop in the savings rate over the past few months, it’s now back in line with the average over the past few years. With this said it’s still well below the 50 yr average of 6.9% and I believe we will continue to trend in that direction and would be very healthy if it did. While it will impact consumer spending, the savings provide a basis for long term investment and domestic financing and would make us less dependent on foreign financing.

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