Consumer purchases unexpectedly
stalled in April as Americans used income gains to shore up savings, raising
the risk the biggest part of the economy may take time to gain momentum after a
slow start to the year.
The unchanged reading in purchases
followed a 0.5 percent gain the prior month that was larger than previously
estimated, Commerce Department figures showed Monday in Washington. The median
forecast in a Bloomberg survey of 79 economists called for a 0.2 percent rise.
Earnings increased 0.4 percent, more than projected, and the saving rate
climbed.
Consumers, who’ve been using the
money freed up by low gasoline costs to pay down debt or rebuild their balance
sheets, would be more inclined to shop as wages accelerate. Sustained
improvement in household spending, which accounts for almost 70 percent of the
economy, is needed to ensure growth rebounds as Federal Reserve officials
project.
“Consumer spending remains a bit restrained,”
said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit
and among the top forecasters of spending in the past two years, according to
data compiled by Bloomberg. “It suggests a weak start to the quarter and puts
growth estimates at risk. I still think things will improve. We’re going to
gain some momentum. All the fundamentals are in place for it.”
Shares Climb - Stock-index futures
held earlier gains after the report. The contract on the Standard & Poor’s
500 Index maturing this month rose 0.2 percent to 2,111 at 8:51 a.m. in New
York amid optimism on progress in Greece’s debt talks.
Projections for spending ranged from
no change to a gain of 0.3 percent, according to economists surveyed by
Bloomberg. The previous month’s reading was initially reported as a 0.4 percent
rise. The revised March increase was the biggest since August.
The Bloomberg survey median called
for incomes to rise 0.3 percent. The prior month was unrevised at little
changed.
Disposable income, or the money left
over after taxes, rose 0.3 percent after adjusting for inflation. It fell 0.2
percent in the prior month. Wages and salaries climbed 0.2 percent. The saving
rate increased to 5.6 percent from 5.2 percent.
The report also showed that
adjusting consumer spending for inflation, which generates the figures used to
calculate gross domestic product, purchases were also little changed in April
after a 0.4 percent increase in March that was the biggest in four months.
Spending’s stop-and-go nature helps explain why the growth has slowed.
Economy Contracts - The economy
shrank at a 0.7 percent annualized rate in the first quarter, revised from a
previously reported 0.2 percent gain, Commerce Department data showed Friday.
Household purchases climbed 1.8 percent following a 4.4 percent surge in the
prior three months that was the fastest since 2006.
While last quarter’s slump reflected
bad weather, a wider trade gap caused in part by a strong dollar, and plunging
investment in oil exploration related to the drop in fuel prices, economists
see many of the restraints dissipating.
Growth may accelerate to a 2.7
percent pace in the April through June period, with household consumption
rising 3.2 percent, a Bloomberg survey showed in early May. Today’s data my
prompt some economists to reduce their consumer spending forecasts.
The Fed’s preferred measure of
inflation remained tame, the report showed. The price gauge based on the
personal consumption expenditures index was unchanged from the prior month and
was up 0.1 percent from a year earlier. That was the smallest 12-month gain
since October 2009.
Core Prices
The core price measure, which
excludes food and fuel, rose 0.1 percent from the prior month and was up 1.2
percent from April 2014. Inflation hasn’t been above the Fed’s 2 percent goal
since March 2012.
The strengthening labor market is one
reason Americans are likely to keep spending. Payrolls rebounded in April, and
the unemployment rate fell to 5.4 percent, the lowest since May 2008. Weekly
applications for jobless benefits are hovering just above a 15-year low reached
at the end of April.
Still, wage gains remain paltry.
Hourly pay was up 2.2 percent in April from a year earlier, holding within the
narrow range tracked over the past four years.
Gasoline Prices
Consumers are also benefiting from
relatively cheap fuel even as gasoline prices have advanced from a six-year low
of $2.03 a gallon on Jan. 25. The nationwide average of $2.45 in April was
little changed from the March average of $2.43, according to data from AAA, the
biggest U.S. motoring group.
Policy makers expect growth to pick
up, one reason they’re considering raising the benchmark interest rate that
they’ve held near zero since December 2008.
“Households are seeing the benefits
of the improving jobs situation,” Fed Chair Janet Yellen said in a May 22
speech in Providence, Rhode Island. If the economy continues to improve as she
expects, “it will be appropriate at some point this year” to start raising
rates, she said.
Source:http://www.bloomberg.com/news/articles/2015-06-01/consumer-spending-stalled-in-april-as-americans-saved-more
No comments:
Post a Comment