Personal income grew in April at twice the rate of spending, boosting the savings rate to the highest level since last summer. According to the Commerce Department, Spending advanced 0.3%, while Personal income increased by 0.6% last month. Both numbers were 0.1%, ahead of expectations.
Let’s break it down:
The Good News: This increase in income was the largest monthly gain since November’s 0.6% advance. Disposable personal income, or income after taxes, climbed 0.5%, following a 0.4% advance in March.
The Bad News: Spending on durable goods, big-ticket items such as cars and appliances, rose 0.8%; Outlays on nondurable items such as food and clothing slipped 0.1%. Look for rising interest rates to negatively impact durables number going forward, while higher inflation eats into spending (goods purchased will have the ~same $ amount, but lower units sold).
The Ugly News: Inflation. A price index for personal consumption expenditures is rising, most especially due to food and energy costs. Beware the news releases that focus on ex- food + energy, as they are foolish knaves sent to waste your time.
We all wish our “personal-consumption expenditures were actually “less food and energy” — but such is life on planet Earth. A boys gotta eat and get to work. That takes (duh) FOOD AND ENERGY.
The Really Ugly News: University of Michigan consumer-sentiment index dropped to 90.2 in May; Economists were looking for 94.4. Ouch.
Consumer Sentiment went south in May — Iraq, Inflation, Gas topping $2 — all soured consumers mood.
In sum, wage earners eked out a little more green, but then promptly handed it over to gas station attendants and supermarkets. Consumers weren’t topo pleased with the situation.
Personal Income Grows 0.6%, Double the Rate of Spending
Barrons Economic Calendar
Data Source: Haver Analytics