US consumer spending unexpectedly flat in April

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US consumer spending unexpectedly flat in April

WASHINGTON - U.S. consumer spending was unexpectedly flat in April, but real disposable incomes recorded their biggest increase in nearly a year as the labor market improved and inflation remained muted, a government report showed on Friday.

By (Reuters)

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Published: Fri 28 May 2010, 6:38 PM

Last updated: Mon 6 Apr 2015, 11:12 AM

The Commerce Department said spending was the weakest since September, when it fell 0.6 percent, after increasing by an unrevised 0.6 percent in March.

Analysts polled by Reuters had expected consumer spending, which normally accounts for over two-thirds of U.S. economic activity, to increase 0.3 percent last month.

Despite April’s flat reading, analysts expect strong spending in the second quarter as a firming labor market boosts household incomes.

Government data on Thursday showed real consumer spending rose at a 3.5 percent annual rate in the first quarter, more than double the 1.6 percent pace in the October-December period.

Spending adjusted for inflation was also flat in April after a 0.5 percent increase the prior month, the Commerce Department said.

Personal income rose 0.4 percent, the report showed, after rising by the same margin in March. Markets had expected income to rise 0.5 percent last month.

Real disposable income rose 0.5 percent in April, the largest increase since May, after a 0.3 percent gain the prior month. The rise in income prompted households to build savings. The saving rate rose to 3.6 percent from 3.1 percent in March. Savings rose to an annual rate of $398.5 billion. The report also showed the personal consumption expenditures price index, excluding food and energy, rising 1.2 percent in the 12 months to April, the smallest rise since September.

The index, which is a key inflation gauge monitored by the Federal Reserve, increased 1.3 percent in March.

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