Fleet Management

Economic Watch: Consumer Spending, Sentiment Decline

May 30, 2014

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Consumer spending in April declined while personal income increased, according to a new U.S. Commerce Department released Friday

The 0.1% drop in personal consumption expenditures follows an upwardly revised 1% increase during March, which was the largest gain since August 2009 and is the first decline in a year.

Purchases of motor vehicles and parts accounted for most of the decrease in April and for most of the increase in March, according to the department. Purchases of nondurable goods decreased 0.3% in April, in contrast to an increase of 0.5% in March while purchases of services decreased 0.2%, in contrast to an increase of 0.5%. Part of this decline is service was reflected in less spending on utilities, due to better weather in May compared to the month before.

Meantime, personal incomes gained 0.3% in April following a 0.5% increase in March while personal savings increased 4% after being downwardly revised to 3.6% in March.

Year-over-year, personal income is up 3.6% and personal spending is 4.3% higher.

“After two back-to-back months of robust spending, consumers have pulled back in April. Despite hopes of pent-up demand driving consumption and overall growth through the second quarter and the second half, it appears after just two months, any lingering demand for goods left over from the winter months at the start of the year has since been satisfied,” said Lindsey Piegza, chief economist at the investment firm Sterne Agee. “Going forward, in order to maintain momentum in spending, there must be sustainable job and income growth. Meaning it will take more than a hefty increase in the jobs number, but an increase in the quality of jobs as well to create wage pressures, which at the moment remain virtually nonexistent,”

She added that employers continue to seek out flexible, low-cost labor with part-time and temporary employees, translating into positive job creation but minimal income growth.

Consumer Sentiment

A new reading shows consumer sentiment in the country declined this month.

The Thomson Reuters/University of Michigan's final May reading on the overall index of consumer sentiment came in at 81.9, down from 84.1 the month before.

The survey revealed consumers are concerned about dismal prospects for wage growth along with declines in inflation-adjusted incomes and standards of living in the years ahead.

These two latest reports follow numbers released earlier this week showing the nation’s gross domestic product declined at an annual rate of 1% in the first quarter of the year, but many analysts are still forecasting total economic growth this year of around 3%.

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