Consumers continued spending in April, although at a slower rate than in February and March, according to the Bureau of Economic Analysis. Both personal income and personal consumption grew 0.4 percent in April, with the former unchanged and the latter down from 0.5 percent in March.
Real consumption, though, suggests that consumer spending is only growing modestly, up 0.1 percent in real terms in three of the first four months of this year. Disposable personal income increased 0.3 percent in April, but has remained virtually unchanged in real terms year-to-date.
Nondurable goods accounted for most of the growth in consumption. Americans purchased $21.1 billion (0.8 percent) more in nondurables in March than the previous month, while durable spending increased $3.8 billion (0.3 percent). This contrasts with a couple months ago when it was the other way around.
In real terms, however, both nondurables and durables were flat, suggesting that higher prices accounted for the bulk, if not all, of the increase in spending. The U.S. savings rate currently stands at 4.9 percent, down 0.5 percentage points in the past six months. What is really hurting consumers right now is higher energy and food costs which is squeezing consumers wallets.
Manufacturing wages and salaries rose by $800 million in April, after growing by $6.6 billion in March. Despite the slower growth this month, the overall trend over the past twelve months has been positive for manufacturing compensation, with wages and salaries up 12 percent in 2010 and the year-to-date annual growth rate in 2011 of nearly 8 percent.
Chad Moutray is chief economist, National Association of Manufacturers.