U.S. Consumer Spending Falls Along with Income

April 30, 2009
Drop follows increases in past two months

Cconsumer spending dropped 0.2% in March after two monthly increases, as American income levels fell, government data showed on April 30.

The Commerce Department said personal consumption expenditures, a main driver of economic activity, reversed course last month after surprising gains in January and February.

The figure was weaker than the 0.1% drop expected by private forecasters.

The renewed caution by consumers came as overall personal incomes fell 0.3%, a figure worse than expectations for a 0.2% drop.

The news was less than encouraging for an economy that according to the most recent estimate contracted at a 6.1% pace in the first quarter. The drop in economic activity came on steep declines in capital investment that offset gains in consumer spending over the quarter.

The weak spending figure thus could lead to a downward revision of U.S. gross domestic product for the quarter, but analysts said they did not see the decline as overly worrisome.

"The modest drop-off in spending does not change the fact that individuals are starting to buy a few more things and are attempting to live their lives a little more normally," said Joel Naroff at Naroff Economic Advisors. "The March drop should not be taken, at least not yet, as a signal that people are rethinking their decisions to start spending again."

The figures showed a price index linked to the the report dropped 0.2%, meaning disposable income was unchanged. Savings as a percentage of income rose to 4.2% from 4% a month earlier.

Copyright Agence France-Presse, 2009

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