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U.S. Personal Spending And Income Rose in April

By JEFF BATER DOW JONES NEWSWIRES May 27, 2005 4:41 p.m.

WASHINGTON -- Americans' incomes grew faster during April but their spending rose at a slower pace, while a key gauge on inflation eased and the savings rate reached a three-year low.

Personal income increased 0.7%, after rising an unrevised 0.5% in March, the Commerce Department said today. It was the largest increase since income climbed 4.0% last December.
April personal consumption rose 0.6%, after climbing a revised 0.9% the month before. Spending was initially seen increasing 0.6% in March.

The median forecast of 21 economists surveyed by Dow Jones Newswires and CNBC called for personal income to increase 0.7% and consumer spending to climb 0.8% in April.
Disposable personal income -- income after taxes -- rose 0.5%, following a revised 0.4% advance in March.

The growth of wages and salaries in April more than doubled. Wages and salaries increased $39.3 billion, after rising $16.5 billion the month before.

Spending on durable goods increased 0.7% in April, after a revised 3.5% increase. Recent auto industry data showed North American vehicle sales totaled 17.46 million last month, up from 16.62 million a year earlier.

Nondurable goods spending rose 1.1% in April, after rising 0.2% in March. Spending on services gained 0.3%, after a 0.7% increase in March.

A price index for personal consumption expenditures, or PCE, excluding food and energy inched up 0.1% in April compared to March. The rate rose 0.3% in March compared to February. Year over year, the price index for personal consumption expenditures minus food and energy rose 1.6% compared with April 2004. The year-over-year climb in March was 1.7%; it was 1.6% in February.

The Federal Reserve watches the PCE price index closely as an inflation indicator. The central bank's so-called comfort zone for the gauge ranges from 1.0% to 2.0%.

Personal saving as a percentage of disposable personal income was 0.4% in April, down from 0.5% in March and 0.9% in February. It was the lowest savings rate since a 0.2% decline in October 2001.

Separately, the University of Michigan's full-month report on consumer sentiment for May was said to show that its index fell to 86.9, from 87.7 in April. The preliminary reading had been reported at 85.3. The University of Michigan report is released only to subscribers. Economists had expected a reading of 86.0 for May. The university's index for consumer expectations was said to have fallen to 75.3 in May from 77.0 in April. The current conditions index for May was said to show an increase to 104.9 from 104.4 in April.

posted by Henry @ 12:57 PM