The Bureau of Economic Analysis said that personal income was unchanged in April, stalling after two months of growth. Higher taxes have had an impact, with personal tax expenditure up 0.6 percent for the month. When adjusting for taxes, personal disposable income in April declined by 0.1 percent.
Wages and salaries in the manufacturing sector followed suit, decreasing from $770.5 billion in March to $768.6 billion in April, reflecting recent softness in the marketplace. This data has been somewhat volatile since November, having been influenced by actions taken in advance of the fiscal cliff deal. As such, we can say that manufacturing wages and salaries in April exceed the levels of January ($760.9 billion), even as they were lower than in December ($806.2 billion). Still, the larger trend for the sector has been for slow-but-steady growth in wages and salaries, having risen from an average of $706.6 billion in 2011 and $748.9 billion in 2012.
Flat income growth overall in April helped to contribute to a decline in personal spending, which fell 0.2 percent for the month. This builds on the slower growth in consumer spending seen in March. Reduced energy prices were another factor, with energy costs off 2.7 percent and 4.4 percent in March and April, respectively. This can be seen in the breakdown of spending by goods. Personal durable goods spending increased 0.4 percent for the month, with nondurables (which include gasoline) down 1.2 percent.
Even with April’s decline, year-to-date growth in personal spending was up 1.1 percent and year-over-year increases were up 2.8 percent, suggesting modest growth overall. Indeed, the consumer has been one of the stronger elements of the current economy, as seen in yesterday’s revisions of real GDP. Yet, we have also seen the pace of spending growth decelerate in the early months of 2013, with the year-over-year pace of consumer spending falling from 3.6 percent in December. Higher payroll taxes and uncertainties about the U.S. and global economy have had some eased spending, it seems, even as we have seen recent improvements in consumer confidence.
The savings rate was unchanged in April at 2.5 percent. While this was its highest pace of the year so far, it remains well below the average of 3.8 percent for 2012.
Chad Moutray is chief economist, National Association of Manufacturers.