Consumer Spending Drops in April

The gauge of spending for consumers in the U.S. fell during April, another stumble in the U.S. economy after months of distorted readings due to the harsh winter.

Personal consumption a gauge that captures spending on services and goods dropped a seasonally adjusted 0.1% compared to March, said the Department of Commerce on Friday.

The forecast had been for growth of 0.1% by economists. The growth in March was revised up from 0.9% to 1% from what was reported previously.

The growth rate in March for spending by consumers was the fastest in the country since August of 2009.

A number of indicators have had volatility over the past few months because of the effects of the harsh winter fading, though most suggest output in the economy will return during the second quarter following a tough first quarter of this year.

The GDP dropped during the first quarter to a seasonally adjusted 1.0% despite strong spending by consumers, showed revised Commerce Department data on Thursday.

Consumer spending increased by an annual rate of 3.1% during the first three months buoyed by an increase in outlays in healthcare as millions of Americans previously uninsured enrolled in the insurance plans that were created through the new law for healthcare.

The report on Friday showed that the consumer spending in April slowdown was one that was broad based. Consumption dropped by 0.1% following a spike of 0.8% in March.

That was the result most likely of a drop in electricity and gas consumption from the high levels during this past winter. Other data pointed to a steep decrease in April of utilities output.

Spending for goods fell by 0.1% during April, after increasing by 1.4% during March. Automakers reported in early May that sales had fallen in April, following a high of seven years during March as the demand pent up during the winter was released.

Personal income a measure of income for government transfers, investment and wages, increased by 0.3% during April, which was down just slightly from March’s growth of 0.5%.

The information showed a drop in payments to Medicaid, which surged in months prior because of payments tied to the new law for healthcare.

Incomes going forward should be helped by an increase in jobs. The economy helped add over 288,000 new jobs during April, which was the second biggest monthly increase since 2009 when the recession ended. During the two prior months, over 200,000 new jobs are added.

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