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Market
Consumer income rising, but spending flat
WASHINGTON (6/27/14)--Income growth climbed 0.4% and wage growth ticked up as well, according to numbers released by the Commerce Department Thursday.

But Americans appear to be stashing away the extra cash, as consumer spending fell 0.1%, after adjusting for inflation, and the savings rate jumped to 4.8%.

The savings rate, up from 4.5% in April, reached its highest mark since August ( Economy.com June 26).

Rising prices may also have tamped down spending, as consumer costs climbed 0.2%, with energy goods and services rising 0.8%.

"Weakness in real spending is likely in part a consequence of a recent pickup in inflation," BNP Paribas said in a research note ( MarketWatch June 26).

Income growth was driven by dividend income, while no other segment stood out, according to Moody's.

The modest increase in consumer spending, meanwhile, was fueled by purchases of durable goods, such as new cars and trucks, while service spending stagnated with a 0.1% upturn.

Further, the Bureau of Economic Analysis announced Wednesday--in its second revision of the numbers--that the economy severely contracted by 2.9% in the first quarter, with healthcare spending plunging considerably.

Moody's analyst Scott Hoyt said Thursday: "The revision puts spending on a weaker trajectory, but also means that saving is higher than previously thought, potentially allowing for more growth."

Still, the recent spending data have led forecasters to revise their expectations for the economy in the second quarter. Analysts now expect the economy to expand 3.6% from April to June, down from 3.8%, according to a survey conducted by MarketWatch.

Others, however, have predicted that the economy will not even reach 3% growth.


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